Examination of Witnesses (Questions 60
- 79)
MONDAY 15 DECEMBER 1997
SIR JOHN
KERR, KCMG, MR
PETER WESTMACOTT,
LVO, MR JOHN
KERBY, and MR
LEE BEAUMONT
MR JAMIE
MORTIMER
60. In which case these brave administrators,
these brave governments in these islands, are up against a highly
professional mob who much have all the resources at their disposal,
whatever that implies. It must take a great deal of courage, must
it not?
(Sir John Kerr) Yes, I think that is correct.
We owe it to them to back them up and I think we do in the various
ways I have described. It is, I think, the case that there are
alternative routes. Let us not kid ourselves that if we manage
to close the Eastern Caribbean route the drugs will not get through.
Ten years ago they would have been coming mainly on the Central
American mainland and, nature, abhoring a vacuum, some other route
will be found, but I think it is very important that the Dependent
Territories should be, and be seen to be, here and in the United
States, clean and working hard to obstruct that trade.
61. Finally, Chairman, it may not be the
time to delve too deeply into Vietnamese migrants to Hong Kong
but am I able to ask you at this juncture, Sir John, how many
of the boat people, of the Vietnamese migrants that arrived in
Hong Kong, were actually repatriated, how many moved on and how
many do we imagine at the time of the handover were still in camps
in Hong Kong?
(Sir John Kerr) You are absolutely entitled to
ask me, Mr Wardle, but I am just not sure I can give you the correct
answer instantly. I am told that of the 214,000 Vietnamese who
passed through Hong Kong from 1979, only about 700 economic migrants
and about 1,300 refugees remain and of course in the case of the
refugees, alternative places of settlement for them are being
sought. In the case of the economic migrants, their return is
being discussed with the Vietnamese and some of them will go back.
62. And are we aware whether that policy
has changed at all since the hand-over?
(Sir John Kerr) No, I do not think it has changed.
If anything, the Government of the semi- autonomous region, the
authorities there, would have wished that we had completed the
job and got everyone out before they inherited it, but I think
it is understood that we did pretty well. I think it is also understood
that we do not acknowledge any contingent liability, that the
policy of port of first asylum was accepted by Hong Kong of its
own volition, that it was by decision of the Hong Kong Government
that these people were allowed to stay and it follows, therefore,
that the United Kingdom has no residual contingent liability in
respect of them.
Mr Davies
63. I notice that within your army of supporters
you have only got one woman. Can I ask why you think that is and
whether you are going to do anything about it?
(Sir John Kerr) I take what I am given. I take
the expertise which is on offer. Perhaps I should play a more
proactive part in pursuing this.
64. It is just an observation for your perusal
and I will move on, if I may. Obviously the Dependent Territories
do embrace a great number of tax havens, et cetera, and there
was a reference to resource accounting made earlier, and I was
wondering whether you could comment, if you could, on the impact
of the resource accounting on, as it were, accountability of financial
risk of Dependent Territories. In particular, I was going to say
that it seems to me that with the sophistication of global commerce
now in terms of back-to-back leasing of planes and all this sort
of stuff, the turbulence of the commercial world is such that
I wonder whether the checks and balances and structures in some
of these Territories are sufficient to guard the British taxpayer
against the risk of some sort of international finance collapse
sort of triggered through one of these Territories and the banking
facilities given to multinationals and the loading of their liability
in particular havens. Is this a concern to you and has much thinking
been done about it?
(Sir John Kerr) Thank you very much. On resource
accounting and budgeting, which I favour myself, resource accounting
and budgeting, I think it is difficult to quantify risk and it
will perhaps be more difficult while people are becoming accustomed
to the resource accounting procedure, but I suspect it probably
makes sense and one probably better quantifies risk once one has
done it. On the risk of systemic damage through a collapse in
the financial systems of one of these Dependent Territories, there
are very striking figures at figure 8 on page 33 of the NAO Report.
It brings out how in three separate areas we are looking at really
rather large markets. The business companies who choose to be
incorporated in the BVI, at 130,000, that is a large number. So
is the number of insurance companies in the Turks and Caicos Islands
and banks in the Cayman Islands. The Caymans is a huge banking
market, the fifth largest in the world, and as a company base
the Virgin Islands are very big, as are the Turks for insurance.
I do not recall that in the Central American banking crisis of
the early 1980s there was any parallel crisis in these markets.
These markets were smaller both absolutely and relatively then.
In the present Asian banking crisis which some feel might spread
to Latin America-hence, for example, the very high Brazilian interest
rates now-there is no hint of it spreading into these markets.
If anything, these markets stand to gain when there is panic money
flying about. This is the sort of place it tends to go rather
than the sort of place it tends to come out of in a crisis in,
say, Asia. I think what we need to do is to make sure that there
is not a crisis in the Caymans or BVI or the Turks and Caicos
Islands. The Governors of course have in all cases, except BVI
and Bermuda, reserve responsibility for supervising offshore finance
regulation. In the case of Bermuda and the Virgin Islands, it
is the local Ministry of Finance, not the Governor. We are extremely
keen to encourage the better regulation of these markets and the
next steps that we see happening are improved investigative powers
which would include statutory powers for assisting overseas regulators,
and a statutory power in the Territory for improved co-operation
with the regulator from the country of origin, the host country
of the bank in question which wants to establish a branch in the
Caymans or BVI.
65. In terms of all the regulatory innovation
that is occurring now in the Bank of England Act in terms of having
a more systematic approach to the emergence of financial products
and the like and what is happening alongside the Bank of England,
are those systems going to be taken over to these Dependent Territories
so that we have a more sophisticated and systematic approach to
this or is it really a hotch-potch of fragmented, you know, trying
to do well? Are we taking on board what is happening in Britain
now in these Territories or will they lag behind for some time?
(Sir John Kerr) Yes, I think most people would
say that the level of regulation in these Territories, though
improving, has some way to go before it catches up with where
the City of London was before the 1st May. I am sure that improvements
in regulation techniques will continue to be carried over into
the markets of the Dependent Territories. In particular, I think
that improved regulation of offshore company formation, which
is the big issue in BVI, and improved regulation of the offshore
insurance industry, which is the big issue in TCI, plus what I
was saying before about powers requiring co-operation with the
regulator in the country of origin of the bank, which is the big
point for the Caymans, I think that these are things on which
we shall go on pressing on the Dependent Territories because action
on them is very much in their interests. It is the same point
as on drugs, that it is very much in their interests to be seen
to be (a) clean and not places where money goes to be laundered,
and (b) sound.
66. Leading on to drugs, can I ask you whether
the amount of resources targeted against drugs which are completely
dwarfed by the prospective drugs revenue from drugs entrepreneurs,
if I can give such a grand title for criminals, do you think that
balance is right?
(Sir John Kerr) No, but we have not got an infinite
amount of money.
67. Secondly, are there any signs that the
drug world is in fact infiltrating governments in the judicial
and commercial systems which you are also in charge of because
clearly drug barons do tend to do this and clearly such a system
does allow them entry, so what signs are there of that and what
are you doing about it?
(Sir John Kerr) I think this area is so important
that any good idea gets funding, whether we would fund it or whether
we would, talking to our American or EU friends, find American
or EU money for it. There is an enormous amount of keenness to
control the drugs flow through the Caribbean. On whether different
governments get tainted, yes, they can and do and in the mid-1980s
there was one particular Dependent Territory Government which
clearly was tainted and people went to jail in fact in the United
States. I do not believe that we have such a case running now.
68. Finally, are there any initiatives,
moving forward, in terms of a systematic approach to the environment
and the future, and I am not talking about volcanoes now so much
as moving with the times in the case of Kyoto? Is that something
you are helping to progress and, if so, how?
(Sir John Kerr) Yes, certainly because we are
responsible, as signatories of various international agreements,
for ensuring that the Dependent Territories carry out their obligations
in respect of biodiversity, in respect of climate change and so
on, so yes, that is a responsibility which we would be pressing
the island governments to carry out because we do have responsibility
for ensuring that they do.
Mr Page
69. You will be glad to know that Mr Wardle
has asked most of my questions, but I would like to direct my
remarks to the effectiveness of the measures to control drug-trafficking
in the Dependent Territories. We see that the Regional Drugs Intelligence
Unit, which was set up in the British Virgin Islands, was unable
to operate effectively and the other Dependent Territories just
did not use them. Why was that?
(Sir John Kerr) I think that there are three factors:
one, a certain jealousy; two, I think that it was not in itself
very efficient and I think it had the wrong internal structure;
and, three, the problem that I mentioned before of the difficulty
of an island government accepting the FBI presence as part of
a law enforcement posse. I think that we have got around this
with moving the operation to Miami and resourcing it rather better,
equipping it with very good, high-tech, secure communications
equipment, which has been presented to each Dependent Territory
Government. Each of their law enforcement agencies is on net to
the others, to us, to the Americans. I think that they see that
as a definite gain from their law enforcement, so I think we are
over the ownership problem of this. I also think that some of
the results, some of the numbers of seizures are really rather
good, so I would hope that the problem is solved.
70. I was going to ask you about the seizures,
but before I do, could you just say how many of the peoples of
the Dependent Territories are actually at Miami compared with
those on the American side or the British side?
(Sir John Kerr) None. Miami is very small. Miami
is three people inside our Consulate. It has a link to the American
authorities which are just down the road, also in Miami, and they
have a link through to their much bigger battalions at Key West
and in Puerto Rico. It is a network, it is a system. It is not
a service; it is a system. It is a means of exchanging information
which they, the Dependent Territories' Governments, see as highly
valuable to them. The system comes over the air. They listen to
reports coming in. They will then want to do something about it.
They are aware that the information exists and clearly there is
incentive as the British and the Americans know it exists, therefore,
not only will they want to do something, but they will want to
be seen to do something about it.
71. You mentioned the various seizures which
have been made by the Royal Navy, but what have been the seizures
made by the forces under the control of the Dependent Territories?
(Sir John Kerr) I do not have total numbers. The
amounts are quite high. For example, 59 tonnes of cocaine and
318 tonnes of marijuana, aircraft, vehicles and vessels worth
over $32 million and the arrest of over 1,000 drug traffickers,
that is the Turks and Caicos and the Bahamas. I do not have the
total number for each of the Dependent Territories, but I think
it is impressive.
72. Is it a substantial amount?
(Sir John Kerr) I think there is a serious effort
being made.
73. We have found that the drugs surveillance
plane which of course was provided did not have the proper night-flying
capacity, but now it has. Could you say when that capacity was
supplied? Was it supplied before or after you received the draft
Report?
(Sir John Kerr) That I cannot say. I suspect it
was probably supplied this year, but I do not know the answer.
(Mr Higgins) I think the answer is that the plane
was there before the Report was concluded. I think, subject to
correction, that it was supplied during the period in which we
were carrying out our work, and that is why it got recorded.
74. I rather suspected that might be the
case. The thing that concerns me about this is almost the turf
warfares. There were no combined operations with the marine launches
in the Virgin Islands before 1996. Surely is that not a requirement
that the aircraft and the ship work together in harmony? Is that
right?
(Sir John Kerr) Yes, I am sure it is, Mr Page.
I am sorry I am not an expert. All I can tell you is that I am
advised that the plane's recent operations have resulted in two
recent seizures worth $11 million, or 450 kilos of cocaine. I
guess you are right, that there clearly is a story which the NAO
have, I am sure, correctly described here of inadequate early
use of this plane.
75. From everything you say, Sir John, it
does appear to me that the forces are starting after obviously
some considerable time to actually work together in a cohesive
way which would have been better five or six years ago, but we
are where we are. If we look at the report on the police and customs
vessels in the water of the Virgin Islands, we read, and this
is on page 46, paragraph 12, that the boats they have do not match
the capabilities of the drug smugglers. Now, this I would describe
as a limiting factor, so if you cannot catch them with speed,
unless you are going to get your planes to bomb them or something
like that, what do you do about it?
(Sir John Kerr) You see where they go. We have
a capability to keep an eye on them. We also have the West India
guardship, our Royal Navy ship, and the fleet auxiliary which
accompanies it, and of course it carries a helicopter which is
quite useful in this situation. I agree with you, there is a problem
in that no matter how good your plane is, it is quite difficult
to make an arrest from a plane and if the plane is not fast enough
to keep up, then the boat is not going to do it either, but the
great grey frigate or destroyer out there in the dark, is well
equipped, it can watch you night and day and it has a helicopter.
There are also a lot of American Navy around and once the intelligence
is into the system, which I described, I think the chances of
success are quite high, but the good thing is that the Dependent
Territories would far rather do the job themselves, they would
far rather catch the guy than have to wait for the Royal Navy
or the US Coastguard. By the way, the US Coastguard, which have
very fast vessels, operate in BVI waters with BVI police on board
them. I think there is a lot of co-operation going on.
76. My last question is this whole question
of justice and if I ask you to go to page 4, paragraph 17, we
look at the efforts to reduce summary trials by magistrate. How
much of a problem has the, as it says here, occasional perverse
jury decision been? Are we talking about one in 100 or one in
ten? Is it just because it happens to be the family that are serving
on the jury or is it because the drug traffickers have managed
to bribe the jury or what?
(Sir John Kerr) Well, my brief tells me that this
is not a large problem, that perverse verdicts by a jury are actually
pretty rare and perhaps no more common than they are before a
jury in the UK. However, there is no doubt that the Caymans did
see a problem because they chose to put all drugs trials not in
front of a jury, but in front of a magistrate. In the Turks and
Caicos Islands, there is an amendment to the law now taking place
which would give increased scope for magistrate trials rather
than jury trials.
77. I can only say that this is a remarkable
amount of trouble to go to for a rare occurrence.
(Sir John Kerr) I can only tell you, Mr Page,
what my experts, male or female, tell me.
78. But your experts, male and female, have
agreed to the word "occasional", but now you have translated
it into "rare", and all these other things.
(Sir John Kerr) I do not want to sound complacent.
There have been one or two high-profile cases.
79. I am not saying that, but we have a
slight difference on whether it is occasional or rare and it seems
to me that some of these countries are going to enormous trouble
to change their various methods of dealing with this matter purely
and simply because perhaps it may not be so rare and it may not
be so occasional and it might be a fairly regular occurrence.
(Sir John Kerr) Yes, of course the right of trial
by jury is there in the Bills of Rights of the Anguilla, Montserrat
and TCI constitutions. To make this change, you do really have
to have a very good reason. I agree that in the Caymans they must
have thought there was good reason and they did make this change,
but perhaps I will ask Peter Westmacott to respond.
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