Following our previous inquiry into the representation of the Crown Dependencies during

the Icelandic banking crisis, we decided to investigate the relationship between the UK and

the Crown Dependencies, and the role of the Ministry of Justice in administering that

relationship. During our investigations, we took both written and oral evidence and visited

Jersey, Guernsey, Sark, Alderney and the Isle of Man.

The Ministry of Justice is the UK Government department responsible for the

administration of the UK’s relationship with the Crown Dependencies, although the

overall responsibility for that relationship is shared across Whitehall. The major aspects of

this relationship involve: the Ministry of Justice informing other Whitehall departments of

their obligations in relation to the Crown Dependencies and mediating contact with the

Islands where necessary; processing insular legislation prior to Royal Assent; keeping the

Crown Dependencies informed in relation to any UK legislation or international treaties

intended to apply to or affect them; representing the interests of the Crown Dependencies

on the international stage; defence; and advising the Sovereign if there is any threat to the

good government of a Dependency which would justify intervention.

The Crown Dependency governments are, with some important caveats, content with their

relationship with the Ministry of Justice. We found that the Crown Dependencies team at

the Ministry of Justice carried a considerable workload, the burden of which sometimes

appeared to prevent the efficient and timely administration of legislative and other business

from the Crown Dependencies. We recommend that the Ministry of Justice reappraise the

priorities for its Crown Dependencies work; focus more on its constitutional duties; and

spend less time on issues for which it is not formally responsible.

The Ministry of Justice should give clearer guidance to other Whitehall departments who

conduct business affecting the Crown Dependencies. Such departments should be made

aware of the constitution position of the Islands, their essential independence from the UK,

their independence from each other, and the fact that their interests need to be considered

routinely in any area of UK policy-making and legislation likely to affect them. We

consider that secondments of officials between UK Government departments and the

Crown Dependencies would help to increase mutual understanding.

The UK Government is responsible for ensuring the good government of the Crown

Dependencies. Some witnesses to this inquiry indicated a desire for the Ministry of Justice

to step in to address certain grievances they have in relation to the governance of the

Islands. However, we consider that the Crown Dependencies are democratic, selfgoverning

communities with free media and open debate. The independence and powers

of self-determination of the Crown Dependencies are, in the view of both the UK

Government and the Island authorities, only to be set aside in the most serious

circumstances, such as a fundamental breakdown in public order or of the rule of law,

endemic corruption in the government or the judiciary or other extreme circumstance.

However, we note that, in very small jurisdictions, it is possible for the existence of very

significant economic, legal or political power to skew the operation of democratic

government and this is a possibility in respect of which the Ministry of Justice should

remain vigilant.

We found that there was duplication of effort in the processes relating to the scrutiny of

insular legislation prior to Royal Assent, with several sets of lawyers sometimes reviewing

legislation for the same purposes. In addition, we found that Ministry of Justice and other

UK Government lawyers were not necessarily confining themselves to the constitutional

grounds for review and were questioning the form and policy content of insular legislation

on other grounds. This is inappropriate, both in terms of a non-essential use of scarce

resources and in terms of the constitutional autonomy of the insular legislatures in relation

to domestic matters. We recommend that the judgement of the insular Law Officers should

normally be relied upon for laws which are of domestic application only, with a reduced

level of scrutiny by Ministry of Justice and other UK Government lawyers. Where

increased scrutiny is required for more complex legislation, the Ministry of Justice should

endeavour to ensure that such scrutiny is carried out expeditiously so as to give timely

effect to the will of the democratically elected insular parliaments.

We were told that the Islands sometimes find themselves in the position of having to

acquiesce in or agree to UK legislation, EU and other international measures affecting

them without sufficient time or opportunity for reflection, discussion or negotiation. We

recommend that the Ministry of Justice set out clear guidelines on the need for UK

Government consultation with the Crown Dependencies as early as possible; and that

including the consideration of the interests of the Crown Dependencies on UK legislative

checklists may be a useful measure.

The Crown Dependencies expressed concern that their interests were sometimes not

effectively represented by the UK Government on the international stage. This is especially

problematic where the interests of the UK and the Crown Dependencies are in direct

conflict. We note that the duty of the UK Government to represent the interests of the

Crown Dependencies faithfully—reflected in the Framework for developing the

international identities of the Crown Dependencies agreed between the UK and the

Islands—is just that: a duty and not an option. In cases of conflict, the Ministry of Justice

should endeavour to find more creative ways of representing the interests of both parties.

Appropriate mechanisms may include designating certain officials, either from the UK or

from the Islands, within the UK delegation as representing the Islands in international

negotiations; and the increased use of Letters of Entrustment, which permit the Island

authorities to conclude their own international agreements in specified areas.

1. At the start of the 2008-09 Session, we conducted a short inquiry into the Ministry of

Justice’s performance in representing the interests of the Crown Dependencies within the

UK Government’s overall response to problems arising as a result of the Icelandic banking

crisis.1 That inquiry highlighted some of the problems that can arise when one partner in a

relationship is charged with representing, not only its own interests, but also those of the

other partners, especially in circumstances where those interests may conflict. Such was

arguably the case during the negotiations with the Icelandic government which followed

the collapse of that country’s banks.

2. Our inquiry into the representation of the Crown Dependencies during the Icelandic

banking crisis threw up broader, constitutional issues about the precise relationship

between the UK and the Crown Dependencies and the role of the Ministry of Justice in

administering that relationship. The current inquiry was, therefore, intended to pursue

these broader questions.

3. We issued the terms of reference for the inquiry and a call for written evidence on 5

August 2009. We have been advised during this inquiry by Professor Andrew Le Sueur, of

the Department of Law, Queen Mary, University of London; and by Professor St John

Bates, Visiting Professor and Director of the Centre for Legislative and Parliamentary

Studies at the University of Strathclyde, Associate Senior Research Fellow at the Institute of

Advanced Legal Studies, and Visiting Professor at the Isle of Man International Business

School.

4. Between December 2009 and March 2010, we took oral evidence from Professor Alastair

Sutton, an expert in the Crown Dependencies’ international relations; officials from the

Ministry of Justice and HM Treasury; and Lord Bach, Parliamentary Under Secretary of

State for Justice. In February 2010, we visited Jersey, Guernsey, Sark, Alderney and the Isle

of Man in order to gather first-hand information from the Crown Dependencies and add

depth to our thinking and, ultimately, to our report.

5. We wish to thank our specialist advisers, those who submitted written and oral evidence

to the inquiry, and all those we met on our visits to the Islands. Their cooperation and

assistance during the course of this inquiry has been invaluable.

6. This inquiry considers the administration of the relationship of the Crown

Dependencies with the Crown. For reasons explained below, the Ministry of Justice is

tasked with the administration of this relationship.

7. The Bailiwicks of Jersey and Guernsey and the Isle of Man are Dependencies of the

Crown, with Her Majesty The Queen as Sovereign.2 The Sovereign is represented in each

jurisdiction by a Lieutenant Governor. Although they are proud of their British

associations, the Crown Dependencies are not part of the United Kingdom and are

autonomous and self-governing, with their own, independent legal, administrative and

fiscal systems. The Island parliaments legislate for themselves. UK legislation and

international treaties are only extended to them with their consent. It has been argued that

Westminster retains a residual legislative power over the Islands in order to avoid “the

impossible position of having responsibility without power”.3 We are not aware of any

example in recent times of such a power being exercised. The Crown Dependencies are to

be distinguished from the UK’s Overseas Territories, which have a different constitutional

relationship with the UK.4 The Crown Dependencies are not part of the EU or EEA but

they are in the Customs territory of the EU by virtue of Protocol 3 to the UK’s Act of

Accession 1972 so that they can benefit from free movement of industrial and agricultural

goods.5 They are also part of the Common Travel Area (CTA), along with the UK and the

Republic of Ireland, which permits movement without immigration controls for all CTA

nationals.6

8. Her Majesty the Queen is Sovereign in each of the Crown Dependencies for historical

reasons which are different for each Island.7 In each case, however, she executes her

responsibilities for the Crown Dependencies on the advice of her Privy Council and her

executive responsibilities are carried out by Her Majesty’s Government. Within HM

Government, the Ministry of Justice is the point of contact for the Crown Dependencies,

and communications in both directions are passed through its offices. Whilst this inquiry

deals with the relationship between the Ministry of Justice and the Crown Dependencies, it

is important to realise that their relationship is technically with the Crown and that HM

Government’s responsibilities are derived from this fact. As Jack Straw told us on 7

October 2008:

The relationship between us and the Crown Dependencies is a subtle one. They are

dependencies of the Crown, they are not part of the United Kingdom, so the

responsibilities I have for them are as a privy councillor.8

9. Part XI of Volume 1 of the Report of the Royal Commission on the Constitution,

published in 1973 and known as the Kilbrandon Report, sets out an account of the duties

of the Crown in relation to its Dependencies.9 The Crown’s responsibilities include:

The precise extent, and limitations, of these responsibilities are unclear, however, and we

have sought clarification on these issues throughout our inquiry. This Report focuses, not

only on the Ministry of Justice’s administration of these responsibilities, but also on its

management of the UK’s relationship with the Crown Dependencies more widely,

including the Ministry of Justice’s role in the interactions between the Crown

Dependencies and other Whitehall departments. We make recommendations about the

changes which are required, in terms of both policy and practice, in order to improve the

Ministry of Justice’s management of the relationship between the United Kingdom and the

Crown Dependencies.

10. The Ministry of Justice is the Department charged with administration of the

relationship between the UK Government, on behalf of the Crown, and the Crown

Dependencies.11 In evidence to us on 7 October 2008, the Justice Secretary, the Rt Hon Jack

Straw MP, described the responsibilities of the Ministry of Justice as including

international relations; defence; ensuring that the Crown Dependencies meet their

international obligations, including human rights obligations; and the “good government”

of the islands.12 The limits of these responsibilities in relation to its Dependencies have

never been tested, and this contributes to the Justice Secretary’s description of the

constitutional relationship as a “subtle one”.13

11. The Ministry of Justice has outlined the broader work of the Crown Dependencies

Branch, which sits inside the International Directorate of the Ministry of Justice.14 The

Crown Dependencies Branch:

The Ministry of Justice emphasises the extent to which the relationship with the Crown

Dependencies is a shared responsibility across government, with the Ministry relying on

other departments for advice, assistance and international representation.16

12. Within the Ministry of Justice policy team dedicated to the Crown Dependencies, three

operational staff deal with Island legislation, Crown appointments and honours. A further

three policy officials deal with a range of policy issues and provide practical advice and

support to the Crown Dependencies when required. It is their responsibility to ensure that

the Islands’ interests are taken into account in UK policy development and they work with

the Islands on the development of their own policies, particularly where these have

relevance to the UK or an international dimension. This team is supported by four lawyers,

who advise the policy team and other UK Government departments. They also work

directly with the Islands, for example, when working on the extension of UK enactments to

the Crown Dependencies by Order-in-Council or to resolve questions about insular law

submitted for Royal Assent.17

13. The Crown Dependency governments are, with some important caveats, content with

their relationship with the Ministry of Justice.18 When we visited the Channel Islands and

the Isle of Man, we were told that Ministry of Justice officials generally understood the

constitutional position of the Crown Dependencies with respect to the UK; understood

that there were differences between the Islands in terms of their constitutions, politics and

interests; worked hard to support the Crown Dependencies; and that relationships with

Ministry of Justice officials were generally good. We heard some concerns about the extent

to which the Justice Secretary was engaged with and understood issues relating to the

Crown Dependencies, but it was accepted that Lord Bach, Under Secretary of State for

Justice, did take an active role in the relationship.19

14. We note that the Justice Secretary agrees to answer parliamentary questions on matters

which might be considered domestic issues for the Crown Dependencies and nothing to do

with the Ministry of Justice. He acknowledges that some people argue that he should not

do so and should leave such matters for the Islands themselves.20 Nevertheless, he told us

that:

… No-one has ever said to me, “You should not answer this parliamentary question

because the Crown Dependencies are not part of the United Kingdom” because it is

part of my ministerial responsibility. It does not directly arise from being Lord

Chancellor, it is the distribution of business. I did it when I was Home Secretary

because it used to be in the Home Office.21

The problem with the Justice Secretary’s justification is that it does not distinguish between

his constitutional responsibilities for the Crown Dependencies—which are limited to

certain issues including good government, international relations, international obligations

and defence—and other, more general matters which may be of policy relevance to the UK

but are not within his responsibilities as Justice Secretary and Lord Chancellor. This can

give rise to an expectation amongst some Islanders that the Justice Secretary has

responsibilities and powers in areas which are, in fact, outwith his constitutional duties.

15. We believe that, in agreeing to answer Parliamentary Questions on topics which are

essentially domestic matters for the Crown Dependencies, the Justice Secretary is

clouding the issue of what, constitutionally speaking, is properly the responsibility of

the UK Government and what should properly be left to the Island governments. The

Justice Secretary should make explicit in his answers to Parliamentary Questions

whether or not he considers the matter addressed to fall within his constitutional

responsibilities.

16. All of the Island governments, either in written evidence or during our visits, have been

explicit that they believe the Ministry of Justice Crown Dependencies team to be underresourced.

17. Given that the Crown Dependencies team at the Ministry of Justice appears to

struggle with the resources it has, we suggest that a reappraisal of the constitutional

duties of the Ministry of Justice might be a timely step in the right direction. The

Ministry of Justice should prioritise those duties and restrain itself from engaging in

areas of work which are outwith its constitutional remit.

18. The Crown Dependencies team at the Ministry of Justice is responsible for ensuring

that other Whitehall departments have the necessary advice and information about the

constitutional position of the Crown Dependencies and are aware of their responsibility to

take the Islands’ interests into account in formulating UK policy and legislation.28 The

Ministry of Justice told us that the team takes a “proactive approach to this, engaging key

stakeholders across government on issues concerning the [Crown Dependencies] and

using opportunities such as the recent seminars organised by DEFRA to explain the

constitutional position of the [Crown Dependencies]”.29

19. There are other resources which provide UK Government departments with

information about the Crown Dependencies. For example, the Cabinet Office provides a

21. Nevertheless, there are occasions when the insular authorities talk directly to Whitehall

departments with which they have an established relationship, usually at official level.

Where this works, the insular authorities say they find it helpful as they are able to present

their interests and views directly to those charged with the relevant policy area, rather than

relying on the advocacy of the Ministry of Justice.

22. The Island governments expressed serious reservations about the extent to which their

constitutional position is understood across Whitehall, arguing that this lack of

understanding had led to some unfortunate consequences.36 First, there is concern that the

UK Government is interfering illegitimately with policy formulated by the democratically

elected governments of the Crown Dependencies. Second, the Island governments are

frustrated that the Islands’ interests are not always taken into account in the formulation of

UK policy, either at all or in sufficient time for them to have significant input into the

outcome of the policy-making process. Third, where the interests of the UK and the Crown

Dependencies conflict, the insular governments have a sense that their interests will always

be subordinate to those of the UK.

23. These factors are major barriers to an effective relationship between the Crown

Dependencies, the relevant Whitehall policy departments and even, to a certain extent, the

Ministry of Justice itself. The Islands have a highly developed sense of their own

independence as democracies and, what is more, they see significant differences between

themselves in terms of constitution, government and interests. There is an additional layer

of complexity: within the Bailiwick of Guernsey, there are three democratically elected

bodies—the States of Guernsey, the States of Alderney and Chief Pleas in Sark—each with

varying degrees of legislative and executive power.

24. Representatives of all five democratically-elected authorities have expressed to us

frustration that those they are dealing with in the UK Government sometimes fail to

distinguish between them, confuse their interests—which may be different—and even

confuse them with the Overseas Territories. The latter is a particularly sore point in

relation to the financial services sector, where the insular authorities are at pains to point to

the conclusions of the Foot Report that the Crown Dependencies are, in fact, extremely

well regulated, whereas the same could not universally be said of the Overseas Territories.37

25. The question of “identity” is of great concern to the Crown Dependencies and its

presentation, both within the UK and internationally, is of the highest importance to them.

Whilst it is the express duty of the Ministry of Justice to inform others across Whitehall of

the constitutional position of the Crown Dependencies and the appropriate approach of

the UK Government towards them and their interests, the Justice Secretary himself told us

that:

… although they are self-governing Crown Dependencies, plainly, it is quite

complicated to explain that. It is quite complicated to explain it here to the

cognoscenti, it is still more complicated to explain it to perhaps abroad or to

international organisations …38

26. There is no doubt that the Ministry of Justice is trying, with the resources it has at its

disposal, to raise awareness about Crown Dependency issues in Whitehall. It is true that

the constitutional position of the Crown Dependencies is not obvious, but nor is it as

complex as the Justice Secretary seems to suggest. In spreading the message, it would be

helpful if more use were made of secondments of officials between UK Government

departments and the Crown Dependencies, which would assist in spreading understanding

in each of how the other functions.

27. We recommend that the Ministry of Justice redoubles its efforts to produce a simple

account of the constitutional position of the three Crown Dependencies. This should

highlight their essential independence from the UK, their independence from each

other, and the fact that their interests need to be considered routinely by all UK

Government departments in any area of policy-making likely to impact on them. Those

departments should be left in no doubt about the limits of legitimate intervention in

Island policy and legislation and about their duties in considering their interests. In

achieving these aims, we believe that it would be helpful if more use were made of

secondments of officials between UK Government departments and the Crown

Dependencies in order to increase mutual understanding.

28. In 2008, the Department of Health decided to terminate the long-standing Reciprocal

Health Agreements with the Crown Dependencies under which Island visitors to the UK

and UK visitors to the Islands received free health care.39 This was, apparently, on the

ground that the Agreements did not represent value for money for the UK taxpayer. The

Department of Health judged that more was spent by the UK on treating Crown

Dependencies visitors to the UK than was spent by the Crown Dependencies on UK

visitors to the Islands. Following termination of the Agreements, emergency treatment will

remain free, but further treatment will be subject to charge.

29. At some point in the first half of 2008, Jersey and Guernsey were informed that their

Reciprocal Health Agreements with the UK would be terminated. The Ministry of Justice

was told by the Department of Health on 4 June 2008 that the future of the Reciprocal

Health Agreements with the Crown Dependencies was “about to be considered by

Department of Health ministers”. The Ministry of Justice was then made aware of the final

decision on 30 June 2008, the day before a meeting between Department of Health officials

and representatives of the Crown Dependencies.40 At that meeting, Jersey and Guernsey

were given formal notice that their Reciprocal Health Agreements would end and the Isle

of Man was told for the first time that its Reciprocal Health Agreement would also be

terminated.41 No Ministry of Justice official was present at that meeting and the Ministry of

Justice accepts that this was unfortunate, but denies that it would have affected the

outcome.42

30. The Reciprocal Health Agreements with Jersey and Guernsey were terminated with

effect from 1 April 2009; the Reciprocal Health Agreement with the Isle of Man was due to

be terminated with effect from 1 April 2010, but an extension of a further six months was

negotiated at the last minute pending further talks.43

31. Island residents have been advised to obtain health insurance for travel to the UK from

now on. This has caused serious concern to Island residents, particularly the very elderly or

those with pre-existing conditions who find it hard or impossible to obtain health

insurance yet wish to visit friends and relatives on the mainland. The same is true for UK

residents wishing to visit the Crown Dependencies. However, the UK Government has

emphasised that it does not fund healthcare for UK residents travelling abroad and visits to

the Crown Dependencies should, in its view, be no different.

32. Islanders have expressed outrage to us at the abrupt ending of the Reciprocal Health

Agreements and have called for them to be reinstated.44 Particularly vocal have been Isle of

Man residents who have served in the UK’s armed forces, many of them conscripts in the

Second World War. Unless they receive a war disability pension, they will not receive free

treatment in the UK following termination of the Agreements. They argue that, since they

have in the past risked their lives for the UK, the very least they are entitled to is free

healthcare when they visit that country.45

33. The issue for us is not so much the substance of the decision itself, but the way in which

the proposal was developed, considered and executed. All three Island governments have

complained that the decision was taken summarily by the Department of Health, without

consultation. The Island governments have said that the decision to terminate the

Agreements was imposed on them in a high-handed manner, with no opportunity given

for discussion about alternative resolutions or financial packages.46 We have been told that

the Ministry of Justice tried to assist the Islands in setting up meetings with the

Department of Health, to no avail. The Isle of Man government did eventually meet with

the Health Secretary, but this meeting was set up following the intervention of Andrew

Mackinlay MP, not with the assistance of the Ministry of Justice.47

34. This case is a good example of how relations between the Crown Dependencies and the

UK Government can be badly damaged by insensitive handling of an important issue. We

say nothing about the decision itself. However, the Department of Health should have been

aware, and the Ministry of Justice should have made it aware, that the issue of healthcare is

an emotive one for islanders, many of whom have strong family links with the UK

mainland. The need to obtain medical travel insurance will present a real obstacle to elderly

or infirm islanders who wish to visit friends and family on the mainland, and vice versa.

This was a decision which required sensitivity of approach and, at the very least, an

opportunity for discussion about alternative options such as a new financial package which

would redress the financial balance to remove the burden from the UK taxpayer.

35. We believe the lack of consultation, and discussion of possible options, with each

Crown Dependency was a failing in the UK Government’s approach to its

responsibilities in deciding the future of the Reciprocal Health Agreements. The fault

appears to lie primarily with the Department for Health but we are left with the clear

impression that the Ministry of Justice failed to take responsibility for intervening to

ensure that a proper procedure was followed. It is simply unacceptable for the Isle of

Man to be told, without warning, at a meeting on 1 July 2008 that the Reciprocal Health

Agreement would be terminated; and this in the absence of an official from the

Ministry of Justice, the department charged with ensuring representation of the Island

interests within the UK Government. Nevertheless, we welcome the extension of the

Reciprocal Health Agreement with the Isle of Man for a further six months pending

further negotiations.

The Crown has ultimate responsibility for the good government of the Islands.

— Kilbrandon Report, para 1361

36. Kilbrandon explains that the basis on which the Crown has ultimate responsibility for

the good government of the Crown Dependencies stems partly from the fact that, with the

UK, they are all part of the British Isles. Whilst this did not make uniformity essential, it

was “nevertheless highly desirable that the institutions and the practices of the Islands

should not differ beyond recognition from those of the United Kingdom”. All parties were

in favour of the Crown Dependencies expressing their individuality, but it was recognised

that “the British Islands were an entity in the eyes of the world, and the United Kingdom

Government would be held responsible internationally if practices in the Islands were to

overstep the limits of acceptability”.48

37. There is a high degree of consensus amongst academics, legal advisors, politicians and

officials about the meaning of the term “good government” used in the Kilbrandon

Report.49 They agree that good government would only be called into question in the most

serious of circumstances, exemplified by the recent events in Turks and Caicos which did,

indeed, lead to UK Government intervention.50 Such circumstances are likely to include a

fundamental breakdown in public order or endemic corruption in the government,

legislature or judiciary. Kilbrandon himself gives a restrictive view of the circumstances

which would legitimately give rise to the duty of the UK Government to intervene in

insular affairs on the ground of good government, whilst recognising that those

circumstances need not be too tightly defined:

There is room for difference of opinion on the circumstances in which it would be

proper to exercise that power. Intervention would certainly be justifiable to preserve

law and order in the event of grave internal disruption. Whether there are other

circumstances in which it would be justified is a question which is so hypothetical as

in our view not to be worth pursuing. We think that the United Kingdom

Government and Parliament ought to be very slow to seek to impose their will on the

Islands merely on the grounds that they know better than the Islands what is good

for them; there is ample evidence in the differences between United Kingdom and

Island legislation in social matters to show that this policy has in fact been followed

for very many years.51

Kilbrandon suggests that intervention to preserve law and order or in the event of grave

internal disruption would be justifiable, but that an attempt to define the circumstances

further would be essentially pointless. He points to ample evidence of a policy of restraint

in the use of power on the part of the UK Government as a reason for not pursuing the

matter.

38. The current ministerial team are clearly following this non-interventionist policy. The

Justice Secretary told us that he has the power to intervene in insular affairs on the ground

of good government, but that he had not found it necessary to do so. He favoured a

collaborative approach, whereby the UK Government and the Crown Dependencies

worked together to anticipate any problems which might conceivably arise and deal with

them in good time in order to prevent the need for active intervention.52 Closely following

the Kilbrandon formulation, Lord Bach stated in the House of Lords that intervention in

circumstances of “grave breakdown or failure in the administration of justice or civil

order” would be justified. However, he added—paraphrasing the Kilbrandon Report—that

“It is unhelpful to the relationship between Her Majesty’s Government and the Islands to

speculate about the hypothetical and highly unlikely circumstances in which such

intervention might take place.53

39. Some people have argued that certain events, such as those arising out of the historic

child abuse inquiry in Jersey, are serious enough to warrant intervention in insular affairs

by the UK Government.54 Underlying these calls for UK intervention is a belief either that

UK responsibility for domestic affairs in the Crown Dependencies has been engaged by

events serious enough to fall within the definitions set out in the Kilbrandon Report; or

that the UK’s responsibilities are actually much wider than the definitions set out in the

Kilbrandon Report. Either way, such beliefs create expectations of UK intervention which

are not fulfilled.

40. Calls for the UK Government to intervene have been declined by the Justice Secretary:

You have to be very careful about exercising [the power to intervene on the ground

of good government] and it will be known that I have had representations in respect

of certain criminal proceedings … and I have declined to intervene in those, as far as

I am concerned, on good grounds.55

41. We note the depth of feeling of some witnesses to this inquiry who have indicated

serious grievances with various aspects of the governance of the Crown Dependencies

and their desire for the UK Government to step in to address their concerns. However,

the Crown Dependencies are democratic, self-governing communities with free media

and open debate. The independence and powers of self-determination of the Crown

Dependencies are, in our view, only to be set aside in the most serious circumstances.

We note that the restrictive formulation of the power of the UK Government to

intervene in insular affairs on the ground of good government is accepted by both the

42. Sark is part of the Bailiwick of Guernsey. It has its own legislative and executive body,

the Chief Pleas, and legislation from the States of Guernsey can only be applied to Sark

with its consent. Chief Pleas has legislative competence in relation to domestic matters

except for criminal law, which is reserved for the States of Guernsey.

43. Until 2008, Sark’s government was based on a feudal system. The Seigneur, a hereditary

position, was the head of government. Chief Pleas was made up of the feudal landholders—

the Tenants—and twelve deputies of the people. The Seneschal was the presiding officer

and Chief Judge. This arrangement came to be considered untenable in the light of human

rights law, and the long process of reform was started.

44. Without setting out the minutiae of the tortuous reform process, it is sufficient to note

that, since the Sark Reform Law 2008, Chief Pleas has been a democratically elected body.

It is made up of 28 Conseillers, elected by universal adult suffrage for the first time on 10

December 2008, the Seneschal, who remains presiding officer and Chief Judge, and the

Seigneur.

45. For the purposes of this Report, Chief Pleas is interesting for two reasons. First, during

the reform process, the Justice Secretary rejected the first formulation of the new legislature

after it had been passed by Chief Pleas but before it received Royal Assent. He declined to

recommend the proposed law for Royal Assent on the basis that it was inconsistent with

basic democratic principles, some of which were set out in the European Convention on

Human Rights.56 In other words, Royal Assent was withheld on the basis that the law was

not compatible with the UK’s duty to ensure compliance with international obligations.

Our impression is that the Justice Secretary also regarded this as a “good government

issue”.57 When a revised law was resubmitted by Sark, the Justice Secretary judged it to be

acceptable and recommended it for Royal Assent, which it duly received.58 Refusal of Royal

Assent is a relatively rare occurrence as most inconsistencies are normally addressed

through dialogue and collaboration before an Island parliament passes a law.59

46. Second, although Sark now has a democratically elected government which is judged to

comply with international human rights obligations by both the Justice Secretary and the

Supreme Court60, a question mark has been placed over its continued ability to function

properly. When we visited Sark, we were told of the considerable economic and political

power exercised by Sir David and Sir Frederick Barclay. They are major employers on Sark

and own a considerable amount of land and businesses there. It follows that the livelihoods

of many Sark’s people depend on them.

47. This was amply demonstrated by the events which followed the first democratic

election on Sark in December 2008. In the poll, all but two of the Barclays’ publicly

preferred candidates for election to Chief Pleas were rejected, whereas nine of the

successful candidates had, prior to the election, appeared on the brothers’ published list of

candidates described as “dangerous to Sark’s future”. The following day, the Barclays

closed down a number of businesses they owned and stopped their building projects on the

Island. As many as 140 (estimates differ) of the 600 inhabitants were out of work until the

Barclays reopened most of their businesses a few weeks later.61

48. We were also told that the Barclays were engaged in a long-running battle of attrition

with individuals, particularly Members of Chief Pleas, whereby the Barclays repeatedly

instructed their lawyers to write to individuals demanding retractions or apologies in order

to protect their interests and reputation.62 We were told that such legal action rarely comes

to court because the Islanders involved often cannot afford to defend themselves and

simply capitulate, however unwillingly. We have not tested these allegations in evidence

and we do not intend to take sides or make judgement on these issues.

49. As a matter of general principle, we note that, in a very small jurisdiction, there

must always be the possibility that individuals wielding very significant economic, legal

and political power may skew the operation of democratic government there. Just as

the establishment of democratic government in Sark was a matter of good government,

any threat to the ability of that system to operate fairly and robustly has the potential to

raise good government issues which might require UK Government intervention. This

is a matter on which the Ministry of Justice needs to keep a watching brief.

The [Privy] Council’s main business in connection with the Island is to deal with

legislative measures submitted for ratification by Order in Council. The [Justice]

Secretary is the member of the Council primarily concerned with the affairs of the

Islands and is the channel of communication between them and the Crown and the

United Kingdom Government. He has the duty to see that the Islands’ legislative

measures are scrutinised and that there is consultation with any other Ministers who

may be concerned, including, if necessary, the Law Officers of the Crown, before the

measures receive the Royal Assent.

— Kilbrandon Report, para 1361

50. Legislation passed by an Island parliament is then passed to the UK for scrutiny prior

to the granting of Royal Assent.63 The Sovereign (or the Lieutenant Governor in the case of

much Manx legislation) grants Assent on the advice of her Privy Council. For these

purposes the Justice Secretary is the relevant Privy Councillor.

51. The Justice Secretary can recommend that Assent be withheld, although the grounds

for doing this are not entirely clear and it is a rare occurrence.64 It would certainly be

legitimate to withhold Assent if the legislation would put the relevant Island in breach of an

international obligation which applies to the Island and for which the UK is responsible.

Island legislation must comply with international human rights obligations, for example,

and it was on this basis that Sark’s first attempt at a Reform Law was refused.65 The need to

ensure “good government” of the Islands is another possible ground for legislative

intervention, although more difficult to determine. The UK Parliament also appears to

have competence to legislate for the Crown Dependencies in the areas of defence,

nationality, citizenship, Succession to the Throne, extradition and broadcasting, by

implication limiting the competence of the Island jurisdictions in these areas. Nor are these

areas thought to be exhaustive.66

52. It is clear is that the UK has, on occasion, leant heavily on Island governments to

modify legislation at stages prior to submission for Royal Assent. This may have been on

the grounds that the legislation was in some sense constitutionally defective, although we

have been told about cases where intervention was clearly on policy grounds. In practice, it

is informal dialogue, rather than the formal withholding of Royal Assent, which is usually

the mechanism for bringing about a change in Island legislation.67 The Isle of Man has

gone a step further than the Channel Islands and has formalised the process of passing

draft legislation to the Ministry of Justice before it is passed by the Manx legislature,

although it is still scrutinised again by the Ministry of Justice afterwards.

53. The Ministry of Justice told us that, in 2008, it processed over 100 Island Laws to Royal

Assent. For each piece of insular legislation, there are multiple layers of scrutiny. First,

legislation is checked for compliance with international and other obligations by the

Attorney General of the relevant Island jurisdiction. It is then checked again by lawyers at

the Ministry of Justice. Where there are particular policy issues which are within the remit

of another Whitehall department, the legislation is then passed to the lawyers in that

department for further, specialist, scrutiny.68

54. The processing of Island legislation prior to the granting of Royal Assent is sometimes

subject to significant delay and this is a matter of considerable concern to the insular

authorities.69 Within the Bailiwick of Guernsey, delays are sometimes exacerbated for

Alderney and Sark because their legislation has an additional level of scrutiny from

Guernsey before it goes to the UK for Royal Assent.

55. The Guernsey government told us that, under normal circumstances, it is expected that

Royal Assent will take between 16 and 20 weeks. However, where it takes considerably

longer than this, there is sometimes no “adequate communication explaining the

reasons”.70 There may be practical consequences for Island residents of delays in getting

legislation on the statute book, for example they may be unable to solve a problem or close

a loophole until the law is passed. More fundamentally, however, the Island governments

state that insular legislation represents the will of an independent parliament,

democratically elected by its people; and delays in obtaining Assent frustrate the will of that

parliament. The government of both Jersey and the Isle of Man make similar calls for a

formalised agreement on processing times for legislation, tracking procedures and an

annual assessment of performance.71

56. It is worth noting that an application by Guernsey for Royal Assent was rejected in

relation to primary legislation which contained provisions which would have allowed the

States of Guernsey to amend by way of ordinance (secondary legislation) provisions

contained in primary legislation. Such provisions are commonly known as “Henry VIII

clauses”. Since ordinances are not subject to the need for Royal Assent and, therefore,

scrutiny by the UK Government, such a mechanism would have reduced substantially the

delay between a law being passed by the States of Guernsey and its coming into effect. The

Ministry of Justice did not agree that this was appropriate, although we note that the use of

Henry VIII clauses in UK legislation is not uncommon.72 A side-effect of this dispute was

that Royal Assent for Laws passed by Chief Pleas in Sark and the States of Alderney was

held up pending resolution of the issue with Guernsey.

57. There are several factors which may contribute to delay in the scrutiny process within

the UK Government. First, officials in the Ministry of Justice and other Whitehall

departments are extremely busy and, where the scrutiny of insular legislation is competing

for resources against urgent UK policy and legislation, the latter is likely to be prioritised.

58. Second, it is argued by the insular authorities that the process of vetting by UK

Government officials is inefficient because three separate sets of lawyers are essentially

performing the same function. They suggest that delays could be cut significantly if the

certificate of the insular Attorney General that the legislation does not breach international

obligations were relied upon, without detailed scrutiny by UK Government lawyers

(Ministry of Justice and policy department), particularly where the legislation is of

domestic application only. Indeed, the vast majority of insular legislation passed for assent

is domestic in nature, so a considerable amount of time and resources might be saved in

this manner.

59. Third, there is suspicion that UK Government officials, both in the Ministry of Justice

and in relevant policy departments, are not clear on the constitutional grounds for UK

Government intervention in Island legislation and are, in fact, checking the legislation for

congruence with UK policy. In doing so, they are actually doing more work than is strictly

necessary or, indeed, constitutionally legitimate. However, despite the Ministry of Justice’s

efforts to educate other Whitehall departments, we were told during our visits that the

Island governments believe that the strict constitutional position is not widely understood.

60. Even where the position was understood, the Ministry of Justice itself admits that

balancing UK and Island interests, which may conflict, when reaching a policy decision

“can be a difficult and involved process in which the [Crown Dependencies] concerns

cannot always take priority”.73 This suggests that, where there are conflicting interests,

interference by the UK Government in the policy of the Crown Dependency

administrations may be motivated by wider political concerns, even though it is not

legitimate on constitutional grounds. This is particularly so where there is an international

dimension to the issue and there is a risk of an adverse reputational impact on the UK

which arises out of the lack of international understanding of the independence of the

Crown Dependencies.74

61. There are other areas of Island policy which, whilst not having a reputational impact on

the UK, may affect the ability of the UK to carry out its own policies. An example would be

the e-gaming legislation in Alderney, which allows the provision of a gambling service

based in Alderney which is accessible by UK residents but is not subject to UK gaming

regulation. As a jurisdiction, Alderney is almost completely dependent on its e-gaming

industry as a source of income and so it has a very strong interest in the continuation of

that business. A further example is the controversial sale of “health foods” by mail order to

UK residents. We were told that the retailers of these products appear to be based in a third

country, but correspondence is through a Jersey Post Office Box which, to its

embarrassment, the Jersey government finds itself unable to close down for legal reasons.

The controversy arises out of the fact that UK retailers of health foods are subject to UK

and EU regulations which do not apply in the Channel Islands. The claim is, therefore, that

the UK retailers are experiencing unfair competition from companies operating through

the Channel Islands: first, because those companies are able to make claims for their

products that UK retailers would be prevented from making; and, second, because they are

selling products containing ingredients which would be illegal if sold in the UK. It is

claimed that companies operating through the Channel Islands are also subject to a more

beneficial tax regime which means that they can undercut the prices offered by UK

companies.75

62. Such cases do not raise constitutional issues, but do raise questions of whether the

Islands are “good neighbours”.76 The need for and legitimacy of discussions between the

UK and the Crown Dependencies on such issues was recognised by the Island

governments, particularly in the Isle of Man, but the Island governments may not always

appreciate that what is financially beneficial to them and creates local jobs may have a

disproportionately adverse effect on UK social policies and UK business.

63. Returning to the constitutional grounds for UK scrutiny of Island legislation, Farida

Eden, a constitutional law specialist at the Ministry of Justice, explained the process of

scrutinising Island legislation to us:

What happens is that a piece of legislation comes into us and we think maybe the

drafting is not quite tight enough or we think there might be a human rights point,

and we will get on the phone to our opposite numbers in one of the Crown

Dependencies and talk them through it. It is a sort of partnership rather than us

taking a hard line and saying we are going to refuse Royal Assent. Sometimes they

will explain something to us and we will say that makes sense or sometimes we might

seek assurances as to how a piece of legislation is actually going to be operated in

practice. It is perhaps a more fluid process than just simply refusing Royal Assent to

a piece of legislation.77

The Justice Secretary also told us that there is sometimes intervention on a drafting point

and gave the example of provisions relating to criminal offences which he considered

rather broad and which he did not think “would have had an easy passage” in the UK.78 We

considered that these two answers gave a rather broad account of the circumstances in

which the Ministry of Justice considered it legitimate to intervene in Island legislation. It is

the informality of this process, together with these rather broad responses, which leads us

to suspect that the UK Government does, indeed, influence Island legislation at the policy

level. There seems to be a rather paternalistic approach to Island legislation, almost as if the

UK Government is unwilling to let its junior Island partner make a slip. This is not,

however, the Ministry of Justice’s role. The Islands are more than adequately advised by

their own Law Officers and parliamentary counsel. It seems a strange use of Ministry of

Justice resources which, we are told, are stretched, to engage in a kind of legislative

oversight which does not restrict itself to the constitutional grounds for scrutiny.

64. The Ministry of Justice is currently working on a revised set of protocols for processing

Island legislation in order to make the process more efficient and timely, although we

understand that this work is being held up by a lack of consensus amongst the Crown

Dependencies themselves.79

65. We do not see the need for multiple levels of intense scrutiny of insular legislation,

prior to Royal Assent, for laws which are obviously of domestic application only. In

such cases, the judgement of the insular Law Officers should normally be relied upon,

with a reduced level of scrutiny by Ministry of Justice lawyers.

66. For more complex legislation where it is desirable to have further scrutiny by the

Ministry of Justice and other Whitehall departments, such scrutiny should be carried

out expeditiously, so as not to frustrate the will of a democratically elected parliament.

To this end, the Ministry of Justice should endeavour to educate the relevant officials in

other departments in relation to their precise responsibilities and, importantly, the

constitutional limits on any intervention they may feel inclined to make.

67. We urge the Ministry of Justice and the governments of the Crown Dependencies to

redouble their efforts to agree a revised set of protocols for the scrutiny of insular

legislation. We consider that this is an ideal opportunity to set out with clarity the

means by which the UK’s responsibilities for insular legislation may be discharged; the

constitutional grounds on which insular legislation may be challenged; the

responsibilities of ministers and officials at each stage of the scrutiny process; and

appropriate time limits for processing legislation prior to Royal Assent. In

streamlining the system, best use can be made of the limited resources available within

the UK Government in general and the Ministry of Justice in particular.

The Islands are not represented in Parliament. Acts of Parliament do not extend to

them automatically, but only if they expressly apply to the islands or to all your

Majesty’s dominions or do so by necessary implication. … By convention Parliament

does not legislate for the Islands without their consent in matters of taxation or other

matters of purely domestic concern.

— Kilbrandon Report, para 1362

It is the practice for the insular authorities to be consulted before an international

agreement is reached which would apply to them. This is particularly necessary in

any case in which application of the agreement to the islands would require

legislation of a kind which would ordinarily be enacted in the Island legislatures.

— Kilbrandon Report, para 1363

68. Some say that Acts of the UK Parliament can only be extended to the Islands with their

express consent.80 The Kilbrandon Report seems to suggest a somewhat different position,

whereby Acts of Parliament apply to the Islands where this is expressly stated or by

necessary implication. However, the Report adds that, by convention, Parliament does not

legislate for the Islands on domestic matters, including taxation, without their consent.81

This formulation of the constitutional position fits with the idea that the UK should not

have responsibility without power, an argument made forcefully by the Home Office, then

the department with responsibility for the Crown Dependencies, to Kilbrandon.82

69. Nevertheless, it is normal practice that consent is sought and the process is generally

unproblematic.83 However, the insular authorities have expressed concern that they have,

on occasion, not been informed in a timely manner of important measures affecting

them.84 In general, the relevant legislation has been within the remit of a Whitehall

department other than the Ministry of Justice. This lack of consultation has been

characterised as disrespectful and arrogant, although an alternative view would be that it is

simply a function of ignorance in Whitehall of the constitutional position of the Crown

Dependencies rather than any particular malice towards them.

70. In cases where the Crown Dependencies have been made aware of measures affecting

them at a very late stage, there has been limited, if any, opportunity for consultation and

negotiation on the terms of the relevant measure. The Island administrations have,

therefore, felt as if these measures were imposed by the UK Government in a clumsy

manner.

71. A good recent example was a clause introduced into the Borders, Citizenship and

Immigration Bill (later the 2009 Act) which would have modified the terms of travel within

the Common Travel Area85 so that residents of the Crown Dependencies would legally be

subject to immigration controls when entering the UK, even if those controls were not

universally applied.86 The Government introduced this clause and, although it was

ultimately removed, the manner of its introduction caused offence in the Crown

Dependencies, a large majority of whose residents are, after all, British citizens. It is

interesting to note that the UK Border Agency states that “We remain committed to

seeking [the introduction of these measures] at some point in the future”.87

72. The Island administrations also express concern about late notification of EU measures

which, whilst not applicable to them directly, nevertheless have a practical effect on their

administration and policy. The same is true of international treaties, particularly where the

Crown Dependencies are not at the negotiating table. The international dimension will be

discussed further in the next chapter, but the point to be made here is simply that the

constitution dictates, and common courtesy demands, that the Crown Dependencies be

consulted in good time in relation to UK and international measures which are to apply to

them.

73. We recommend that the protocols currently being developed by the Ministry of

Justice set out clear guidelines for consultation with the Crown Dependencies on UK

legislation, EU measures and international treaties affecting them. Reasonable time

limits should be built into the system so that the Island governments do not find

themselves rushed into important decisions without an appropriate amount of time for

reflection, discussion and negotiation. It may be helpful to include the category of

Crown Dependencies more prominently on the legislative checklists consulted by UK

Government departments when drawing up proposals for new legislation.

In international law the United Kingdom Government is responsible for the Islands’

international relations. … The United Kingdom Government is also responsible for

the defence of the Islands.

— Kilbrandon Report, para 1363

74. The Ministry of Justice told us that the Crown Dependencies are not sovereign states

and, therefore, the UK Government is responsible for representing them internationally

and for their defence. Although the Ministry of Justice is responsible for the UK

Government’s relationship with the Crown Dependencies, the responsibility for their

international representation is shared across the UK Government. The Ministry of Justice

considers that “the policy-holding department is best equipped to take forward

negotiations which the Ministry of Justice would have neither the expertise nor access to

the correct channels to carry out.” In cases where other departments are involved, the

Ministry of Justice provides a channel of communication between the Islands and the

relevant department and ensures that the latter understands the constitutional position.88

75. The Crown Dependencies are not part of the EU or EEA. However, under Protocol 3 to

the UK’s Act of Accession 1972 they are in the Customs territory of the EU, so that they

can benefit from free movement of industrial and agricultural goods, and they are subject

to the duty to apply the same treatment to all natural and legal persons of the Union.

Protocol 3 has not been affected by the Lisbon Treaty.

76. Professor Alastair Sutton, an expert in European law who has worked with and advised

the Crown Dependencies, considers that, since Protocol 3 was introduced, the importance

to the Crown Dependencies of trade in goods has diminished, with financial services being

far more important in economic terms. He describes four phases in Crown Dependency

relations with Europe. First, from the adoption of Protocol 3, although free movement of

goods was facilitated, there was little or no engagement on either side. Second, the creation

of the Single Market in the European Community in 1985 did not have much impact on

the Crown Dependencies, although they did monitor the situation. Third, from 2000 to

2005, there were significant developments in the taxation field, including the tax on savings

Directive and the Code of Conduct on harmful business taxation. Although tax policy was

outside Protocol 3, the Council of Ministers decided that these measures would apply to

the Crown Dependencies, a view encouraged by the UK Government according to

Professor Sutton. Under pressure from the UK Treasury, the Crown Dependencies

negotiated bilateral agreements implementing the Directive with all 27 EU Member States

and modified their corporate tax structure to conform to the Code of Conduct. Fourth,

since 2005, there has been a period of “constructive engagement” between the Crown

Dependencies and the EU, during which contacts have increased, market access

possibilities have been explored and the Islands have continued to develop their “external

personalities”.89

77. There is a particular issue for the Crown Dependencies in relation to the EU in terms of

both receiving important information about EU activity which is likely to have an impact

on them; and in terms of increasing their profile with the EU and enhancing their “external

personality”. It is, strictly speaking, the role of the Ministry of Justice to feed back to the

Crown Dependencies information on international measures likely to affect them.

However, as noted in Chapter 4, this does not always happen and, when it does, the

information may come too late for anything meaningful to be done to influence the

outcome. During our discussions with the Island governments, it was suggested that one

solution to this particular problem would be for the Crown Dependencies to establish

offices, either together or separately, in Brussels, along the same lines as the Brussels offices

of the devolved administrations of the UK. The Crown Dependencies’ offices would be in a

position to work closely with UKRep and benefit from proximity to the decision-making

heart of the EU in Brussels.90

78. We support the desire of the Island governments to set up representative offices in

Brussels. We consider that such a step would be valuable, both in terms of acquiring

better access to information about EU measures which might affect them and in terms

of raising their own international profiles.

79. The Islands’ “external personality” continues to develop in other areas. The Crown

Dependencies, through dealings with the OECD, IMF and others, have increasingly

ensured that their legislation on tax, corporate governance and economic crime conforms

to international standards. Through the negotiation of Tax Information Exchange

Agreements with third countries, they have been placed on the OECD “white list” as

Jurisdictions which have substantially implemented the internationally agreed tax

standard.91 The international standing and reputation of the Crown Dependencies as

financial centres were further reinforced by the findings of the Foot Report: that they had

adopted high standards of tax transparency and financial regulation and that they should,

therefore, benefit from improved international acceptance”.92

80. The UK has agreed with each Crown Dependency an “International Identity

Framework” as a modern statement of the relationship between the UK and each

jurisdiction (see Appendix 4 for the text of the Guernsey Framework).93 Prior to this the

most recent articulation of the relationship was in the Kilbrandon Report.94 The Ministry

of Justice confirmed that the Framework does not replace Kilbrandon, but aims to describe

in plain language to third parties how the relationship works in practice. As the Justice

Secretary told us, “This is the description of the relationship rather than an establishment

of the relationship”.95

81. The Framework includes an express acknowledgement that, in the context of the UK’s

responsibility for the international relations of the Crown Dependencies it is understood

that:

83. Despite the specific undertaking in the Framework that the UK will seek to represent

differing interests, in cases where there is a potential or actual conflict between those

interests, the Crown Dependencies feel that their interests are of subsidiary importance to

those of the UK and that the end result is more than likely to favour the latter.97

84. A recent example was the role of HM Treasury in representing the interests of the UK

on the one hand, and Guernsey and the Isle of Man on the other, in its negotiations with

the Icelandic authorities during the banking crisis.98 In its written evidence, the Guernsey

government stated that the UK Government apparently prioritised its own interests over

those of Guernsey in negotiations with the Icelandic government. In order that they might

put their case directly to the Icelandic government, the Ministry of Justice stated that HM

Treasury facilitated direct contact between the Islands and the Icelandic authorities.99 The

Guernsey government, however, criticised HM Treasury for a delay in sending a letter to

the Icelandic authorities requesting that they meet with a delegation from Guernsey, this

delay resulting in the letter being sent only after the Guernsey representatives had made

their visit to Iceland.100 On a more general level, the Guernsey government expressed

serious concerns about the extent to which its interests are represented internationally,

given that its representatives are normally excluded from relevant negotiations.101

85. The Isle of Man government has expressed similar concerns in cases where the interests

of the UK and the Island conflict. It describes the support of the UK in such cases as

insufficiently robust and the Isle of Man government is concerned about “the intractable

position of not being able to represent itself, but also not being able to gain the full support

of its “representative”.102 It calls for the inclusion of an Isle of Man representative in

international negotiations where there is a conflict of interest between the UK and the Isle

of Man.103

86. We were told that, in areas of policy which the UK has ceded to the EU, there is an

additional problem for the Crown Dependencies. In the case of the World Trade

Organisation, for example, the UK is represented by the EU and does not send a delegation

of its own. Given that the Crown Dependencies are neither members of the EU nor

represented by a UK delegation, they remain essentially unrepresented in that forum.104

87. In evidence to us in December 2008, Lord Bach confirmed that the UK Government

“looks after the interests in international affairs of the Crown Dependencies”, but then

appeared to suggest that the Government’s duties in this respect were subsidiary to the

interests of the UK.105 In relation to the situation with the Isle of Man and the Icelandic

banking crisis, he told the Committee that:

We represent the interests of the Isle of Man where it is appropriate to do so but we

are part of Her Majesty’s Government, and of course that is our prime responsibility.

The Isle of Man runs its own fiscal affairs, as it runs its own legal system and it runs

everything itself; it runs its own parliament. Our position, under this set-up, is to be

the department in the United Kingdom Government that has the closest relationship

with the Crown Dependencies and looks after its interests where appropriate,

particularly in the international forum. …

… This is an issue that the Isle of Man Government has, and [it] is quite capable of

talking to the Treasury itself. We talk to the Treasury too, of course. In the end,

however, we are not dealing here with a sort of colony; we are dealing here with a

Crown Dependency that, in the case of the Isle of Man, is self-governing, has its own

systems, has its own financial systems. It is not our job to nanny the Isle of Man in

any sense. Our job is, in the broadest sense, to have a close relationship with them

and to assist.106

88. This explanation of the UK Government’s role appears to ignore the fact that Crown

Dependencies have no external personality in the international community. It is for this

reason that the Crown Dependencies pay an annual sum to the UK Government in return

for international representation and defence.107 Lord Bach’s statement would also appear to

put the UK Government at odds with the International Identity Framework, within which

the UK Government undertakes to “seek to represent any differing interest when acting in

an international capacity”.108

89. The representation of the interests of the Crown Dependencies on the international

stage by the UK Government is not optional, according to whether or not the interests

of the Islands are congruent with those of the UK: it is the UK Government’s duty. In

cases of conflict, the Ministry of Justice must endeavour to find a mechanism for

representation which will faithfully present and serve the interests of both parties.

90. During our visits, we discussed a variety of possibilities to address the Island’

governments’ concerns that their interests were not being represented on the international

stage. The Island governments appear to have taken a pragmatic view that the UK has been

unreliable in its representation of their interests internationally and that the time has come

for them to take a more active role on the international stage themselves. This approach is

supported by the International Identity Framework referred to above.109 Although the legal

status of agreements made directly by the Crown Dependencies with third countries,

without the intermediary of the UK Government, is unclear, Professor Sutton points out

that they are practical arrangements which have not, so far, given rise to any disputes

requiring resolution under public international law.110

91. All representatives of the Island governments agreed that the current processes did not

serve their interests in cases of conflict and recognised the extreme difficulty in one

individual or negotiating team seeking to represent two conflicting interests

simultaneously with any degree of credibility. This conceptualisation of the problem led to

the conclusion that a separate individual or negotiating team should be designated with

specific responsibility for representing the interests of the Crown Dependencies.111 This

might be achieved in several ways:

92. We recommend that the Ministry of Justice considers alternative models for the

representation of the interests of the Crown Dependencies internationally. It is

imperative that a means is found by which the Islands are represented effectively and

we strongly recommend that certain officials, either from the UK or from the Islands,

be specifically designated as representing the Islands in international negotiations.

Clear and unambiguous representation of the Crown Dependencies’ interests on the

international stage will assist them in building their relationships with third countries

and international organisations and, consequently, help them to develop their

international identities, as envisaged in the Framework document agreed with the UK.

93. For the same reasons, in cases where international activity leads to the creation of

legal relations, we strongly support the increased use of Letters of Entrustment in

appropriate circumstances, allowing the Crown Dependencies to enter into binding

agreements themselves without the need for direct ratification from the UK.

Geography Area: 116 km2

Coastline: 70 km

Maritime claims: territorial sea 3 nm; exclusive fishing zone 12 nm

People Population: 91,626 (July 2009 est)

National origins: Jersey 51.1%, Britons 34.8%, Irish, French, and

other white 6.6%, Portuguese/Madeiran 6.4%, other 1.1% (2001

census)

Government Chief Minister Terry Le Sueur (12 December 2008); Bailiff Michael

Birt (since 9 July 2009)

Cabinet: ministerial government since December 2005

Elections: ministers of the Cabinet including the Chief Minister are

elected by the Assembly of States; Lieutenant Governor and Bailiff

appointed by the monarch.

Legislature: unicameral Assembly of the States of Jersey (53 are

elected, 12 are senators elected for six-year terms, 12 are constables

or heads of parishes elected for three-year terms, 29 are deputies

elected for three-year terms. Non-elected and non-voting members

are the Bailiff and the Deputy Bailiff (the presiding officers), the

Dean of Jersey, the Attorney General, and the Solicitor General.

Elections last held 15 October 2008 for senators and 26 November

2008 for deputies (next to be held in 2011).

Judiciary and

legal system

The principal court is the Royal Court of Jersey. Bailiff and Deputy

Bailiff appointed by the Crown; Jurats (lay judges of fact) elected by

an electoral college. Judges of the Jersey Court of Appeal appointed

by the Crown.

The Bailiff presides over the Royal Court and is head of the

judiciary. Appeals from the Royal Court are to the Jersey Court of

Appeal (comprising the Bailiff of Guernsey, judges and senior

counsel appointed from the United Kingdom). There is a further

appeal to the Judicial Committee of the Privy Council.

Qualification for the Jersey legal profession requires candidates to

have obtained a law degree from the United Kingdom and to enrol

on a course of tuition at the Institute of Law in Jersey.

Economy GDP (purchasing power parity): $5.1 billion (2005 est)

GDP per capita: $57,000 (2005 est)

Revenues: $829 million (2005)

Expenditure: $851 million (2005)

Industries: tourism, banking and finance, dairy, electronics

Jersey's economy is based on international financial services,

agriculture, and tourism. In 2005, the finance sector accounted for

about 50% of the island's output. Potatoes, cauliflower, tomatoes,

and especially flowers are important export crops, shipped mostly

to the UK. The Jersey breed of dairy cattle is known worldwide and

represents an important export income earner. Milk products go to

the UK and other EU countries. Tourism accounts for one-quarter

of GDP. In recent years, the government has encouraged light

industry to locate in Jersey, with the result that an electronics

industry has developed, displacing more traditional industries. All

raw material and energy requirements are imported, as well as a

large share of Jersey's food needs.

Geography Area: 78 km2

Coastline: 50 km

Maritime claims: territorial sea 3 nm; exclusive fishing zone 12 nm

People Population: 65,484 (July 2009 est.)

National origins: UK and Norman-French descent with small

percentages from other European countries

Government Chief Minister Lyndon Trott (since 1 May 2008); Bailiff Sir Geoffrey

Rowland (since June 2005)

Cabinet: Policy Council elected by the States of Deliberation

Elections: Lieutenant Governor appointed by the monarch; Chief

Minister is elected by States of Deliberation.

Legislature: unicameral States of Deliberation (45 seats; members

are elected by popular vote for four years); note: Alderney and Sark

have separate parliaments, although Alderney also has two

representatives in States of Deliberation.

Judiciary and

legal system

The principal court is the Royal Court of Guernsey. Bailiff and

Deputy Bailiff appointed by the Crown; Jurats (lay judges of fact)

elected by an electoral college. Judges of the Guernsey Court of

Appeal appointed by the Crown.

The Bailiff presides over the Royal Court and is head of the

judiciary. Appeals from the Royal Court are to the Guernsey Court

of Appeal (comprising the Bailiff of Jersey, judges and senior

counsel appointed from the United Kingdom).There is a further

appeal to the Judicial Committee of the Privy Council.

Qualification for the Guernsey Bar requires candidates to obtain

academic qualifications in law from a French university and a UK

university and to have qualified as legal practitioner in the United

Kingdom.

Legal aid is provided on a pro bono rota system by law firms.

Economy GDP (purchasing power parity): $2.742 billion (2005)

GDP per capita: $44,600 (2005)

Revenues: $563.6 million

Expenditure: $530.9 million (2005 est.)

Industries: tourism, banking

Financial services - banking, fund management, insurance -

account for about 23% of employment and about 55% of total

income in this tiny, prosperous Channel Island economy. Tourism,

manufacturing, and horticulture, mainly tomatoes and cut flowers,

have been declining. Financial services, construction, retail, and the

public sector have been growing.

Geography Area: 7.9 km2

People Population: 2,400

Government President of the States of Alderney Sir Norman Browse (2002)

Elections: 10 States Members, half of which are elected every 2 years

for a 4 year term.

Legislature: States of Alderney (two representatives sent to the

States of Guernsey).

Judiciary: the Court of Alderney has original jurisdiction in civil

matters, with appeal to the Royal Court of Guernsey, and limited

criminal jurisdiction. The Court sits as a Chairman and at least 3

Jurats.

Economy Industry: e-gaming, tourism.

Geography Area: 5.5 km2

People Population: 600 (2007)

Government Seigneur John Michael Beaumont, OBE; Seneschal Lt Col RJ Guille,

MBE.

Legislature: Chief Pleas, chamber consisting of 28 elected

Conseilliers, the Seigneur and the Seneschal

Judiciary: the Seneschal’s Court hears cases at first instance, with

appeal to the Royal Court of Guernsey.

Economy Industries: tourism, crafts, finance.

Geography Area: 572 km2

Coastline: 160 km

Maritime claims: territorial sea 12 nm; exclusive fishing zone 12 nm

People Population: 76,512 (July 2009 est)

National origins: Manx (Norse-Celtic descent), Britons

Government Chief Minister Tony Brown (since 14 December 2006)

Cabinet: Council of Ministers

Elections: Lieutenant Governor appointed by the monarch; the

Chief Minister is elected by Tynwald for a five-year term; election

last held 14 December 2006 (next to be held in December 2011).

Legislature: Tynwald consists of the Legislative Council (11 seats;

members composed of the President of Tynwald, the Lord Bishop

of Sodor and Man, a non-voting Attorney General, and 8 others

elected by the House of Keys); the House of Keys (24 seats;

members are elected by popular vote to serve five-year terms); and

both Houses sit together as Tynwald Court.

Judiciary and

legal system

The principal court is the High Court of Justice. Judges are

appointed by the British Lord Chancellor on the advice of the

Lieutenant Governor and following public advertisement for

applicants.

Economy GDP (purchasing power parity): $2.719 billion (2005 est)

GDP per capita: $35,000 (2005 est)

Revenues: $965 million

Expenditure: $943 million (FY05/06 est)

Industries: financial services, light manufacturing, tourism

Offshore banking, manufacturing, and tourism are key sectors of

the economy. The government offers incentives to high-technology

companies and financial institutions to locate on the island; this has

paid off in expanding employment opportunities in high-income

industries. As a result, agriculture and fishing, once the mainstays

of the economy, have declined in their contributions to GDP. The

Isle of Man also attracts online gambling sites and the film industry.

Trade is mostly with the UK. The Isle of Man enjoys free access to

EU markets.

Sources: CIA World Factbook at www.cia.gov; www.worldtravelguide.net

Jersey and Guernsey are autonomous jurisdictions. A Lieutenant-Governor represents the

Crown in each jurisdiction. The Crown also appoints a Bailiff in each jurisdiction who is

both Speaker of the legislature (known as the States Assembly in Jersey and the States of

Deliberation in Guernsey) and the senior judge; and the Law Officers (Attorney General

and Solicitor General in Jersey, HM Procureur and HM Comptroller in Guernsey).

The Isle of Man is an autonomous

jurisdiction. The Lieutenant-

Governor represents the Crown but,

since the Constitution Act 1990, this

role has been more formal than

substantive.

Guernsey is a federal jurisdiction,

including Alderney and Sark, which both

have independent legislative, executive and

judicial systems.

Formal relations between the Crown Dependencies and the UK are conducted through the Lieutenant-Governor and the

Ministry of Justice.

The constitutional status of the Crown Dependencies was examined in the Kilbrandon Report of 1972. This confirmed the

internal legislative, executive and judicial autonomy of the Crown Dependencies, with the UK’s right of intervention reserved to

actions to preserve “good government” in each jurisdiction. This term has never been precisely defined.

More recently, each Island has agreed with the UK a “framework for developing the international identity of [Island]”, which

addresses the external identity of each Crown Dependency.

The UK has constitutional responsibility for the defence and international relations of the Crown Dependencies for which the

latter pay an annual sum. However, in certain circumstances, the Crown Dependencies may be authorised to represent their own

interests internationally by a process of entrustment (through letters of entrustment from the UK Government).115 It is the

practice for the authorities of the Crown Dependencies to be consulted before an international agreement is reached which

would apply to them. The Crown Dependencies have no representations in London, Brussels (EU), Geneva (WTO), Paris

(OECD), or New York (United Nations).

The status of the “international personality” of the Crown Dependencies has increasingly become an issue since they have begun

to take a significant international role as financial centres.

The Review recognises that the following recommendations will require more substantial

action in some jurisdictions than in others.116

1. The UK should discuss and consider governance arrangements with the jurisdictions to

ensure that there is a shared understanding of respective responsibilities and expectations.

2. The quality and extent of financial planning in the jurisdictions should be aligned with

that in the best performers (the Crown Dependencies). In particular, jurisdictions should

implement a prudent approach to managing government finances by developing: a

diversified tax base to maximise sources of revenue; mechanisms to measure and control

public spending; and by building financial reserves during periods of economic growth.

3. The UK should be proactive in satisfying itself that the Overseas Territories in particular

have frameworks capable of identifying and responding to external shocks and

encouraging local governments to undertake responsible adjustment programmes where

these are necessary.

4. To meet international standards, jurisdictions which have not already done so should:

• meet the international standard on tax transparency set by the OECD and

continue, even after meeting the current minimum of 12 [tax information

exchange agreements], to negotiate further TIEAs, giving priority to those

jurisdictions with which they have significant financial links;

• set up the administrative procedures necessary to ensure full delivery of the

OECD standard, to a level of compliance that will satisfy the peer review process

that is being put in place;

• make an early commitment, with a timetable for implementation, to automatic

exchange of tax information under the EU Savings Directive;

• ensure that the regulatory authorities have the necessary resources and expertise

to implement and enforce international financial sector regulatory standards;

• move to amend laws and procedures as necessary to achieve compliance with the

[Financial Action Task Force’s] 16 ‘key and core’ Recommendations.

5. At an international level, the UK should press for improvements in ‘know your

customer’ minimum standards and promote moves towards improved transparency of

beneficial ownership of companies and trusts and the monitoring of politically exposed

persons.

6. All jurisdictions should ensure that:

• governance arrangements in their regulatory authorities are sufficient to

maintain the integrity and independence of all decisions taken;

• responsibility for promotion of the financial centre is separated from the

regulator in both letter and spirit.

7. Those jurisdictions that offer (or propose to offer) protection to retail depositors must

ensure that compensation schemes can be understood by those depositors.

8. Jurisdictions that lack an Ombudsman scheme should consider whether one is justified.

9. Any jurisdiction that has not already done so should undertake a thorough examination

of the range of powers to resolve a crisis in its financial services sector.

10. Local governments should require the regulator to maintain close oversight of any large

locally incorporated financial institutions, the failure of which might lead to requests for

financial help from the UK. This should be backed by the option of a periodic independent

and external review, paid for by the institution itself, commissioned by the local authorities

on their own initiative or at the request of the UK.

11. The UK should discuss with those jurisdictions in need of technical assistance to fight

financial crime how that assistance might be delivered and the benefits of assistance

secured in the longer-term.

Following the statement of intent agreed on 11 January 2006, the Chief Minister of

Guernsey and the UK Secretary of State for Constitutional Affairs have agreed the

following principles. They establish a framework for the development of the international

identity of Guernsey. The framework is intended to clarify the constitutional relationship

between the UK and Guernsey, which works well and within which methods are evolving

to help achieve the mutual interests of both the UK and Guernsey.

12. The UK has no democratic accountability in and for Guernsey which is governed by its

own democratically elected assembly. In the context of the UK’s responsibility for

Guernsey’s international relations it is understood that:

The UK will not act internationally on behalf of Guernsey without prior

consultation.

The UK recognises that the interests of Guernsey may differ from those of the UK,

and the UK will seek to represent any differing interests when acting in an

international capacity. This is particularly evident in respect of the relationship with

the European Union where the UK interests can be expected to be those of an EU

member state and the interests of Guernsey can be expected to reflect the fact that

the UK’s membership of the EU only extends to Guernsey in certain circumstances

as set out in Protocol 3 of the UK’s Treaty of Accession.

13. Guernsey has an international identity which is different from that of the UK.

14. The UK recognises that Guernsey is a long-standing, small democracy and supports the

principle of Guernsey further developing its international identity.

15. The UK has a role to play in assisting the development of Guernsey’s international

identity. The role is one of support not interference.

16. Guernsey and the UK commit themselves to open, effective and meaningful dialogue

with each other on any issue that may come to affect the constitutional relationship.

17. International identity is developed effectively through meeting international standards

and obligations which are important components of Guernsey’s international identity.

18. The UK will clearly identify its priorities for delivery of its international obligations and

agreements so that these are understood, and can be taken into account by Guernsey

developing its own position.

19. The activities of the UK in the international arena need to have regard to Guernsey’s

international relations, policies and responsibilities.

20. The UK and Guernsey will work together to resolve or clarify any differences which

may arise between their respective interests.

21. Guernsey and the UK will work jointly to promote the legitimate status of Guernsey as

a responsible, stable and mature democracy with its own broad policy interests and which

is willing to engage positively with the international community across a wide range of

issues.

concerns. However, the Crown Dependencies are democratic, self-governing

communities with free media and open debate. The independence and powers of

self-determination of the Crown Dependencies are, in our view, only to be set aside

in the most serious circumstances. We note that the restrictive formulation of the

power of the UK Government to intervene in insular affairs on the ground of good

government is accepted by both the UK and the Crown Dependency governments:

namely, that it should be used only in the event of a fundamental breakdown in

public order or of the rule of law, endemic corruption in the government or the

judiciary or other extreme circumstance, and we see no reason or constitutional basis

for changing that formulation. (Paragraph 41)

within the UK Government in general and the Ministry of Justice in particular.

(Paragraph 67)

Members present:

Sir Alan Beith, in the Chair

Mr David Heath

Rt Hon Alun Michael

Jessica Morden

Mr Andrew Turner

Dr Alan Whitehead

Draft Report Crown Dependencies, proposed by the Chair, brought up and read.