APPENDIX 5
Memorandum from Michael Dun, Jersey
HUMAN RIGHTS
"A GUARANTEE OF
POLITICAL AND
ECONOMIC WELL-BEING"
Just as the absence of human rights is an
indicator of instability and insecurity, so the enjoyment of human
rights is an excellent guarantee of political and economic well-being.
Countries which allow adults to contribute
without fear to political life, and which let children enjoy their
childhood and an education, are better equipped to succeed in
the global economy.
Countries which respect the rule of law at
home tend to do so in their dealings with the rest of the world,
too, and thereby win respect as stable and predictable partners
from Foreign Secretary Jack Straw's speech to
the UN reported under Annex 1 of the Human Rights Report 2002.
1. Jack Straw has a strangely blinkered
understanding of expressions like "political and economic
well-being" and their relationship with human rights standards.
2. At the present time the IMF is investigating
more than 40 "offshore finance centres" (OFCs) around
the world. It is estimated that the wealth held globally "offshore"
exceeds US$6 trillion. The implications of such a huge concealment
of wealth in the context of "political and economic well-being"
are not considered (or even referred to) in the Report. Many of
the OFCs under investigation by the IMF are British territories
and offer their various finance centre facilities only with the
support and protection of Jack Straw and his governmental colleagues.
3. The British territories include:
— Guernsey (including Alderney and
Sark);
— British Virgin Islands;
— Turks and Caicos Islands; and
4. Human Rights observance in these small
British territories is ignored in the 2002 Report just as it was
ignored in 2001 and previously.
5. Other OFCs trawling the world include
The Bahamas, Vanuatu, Cook Islands, Marshall Islands, Nauru, Niue,
Panama, St Kitts and Nevis, St Vincent, Antigua, Barbuda, Andorra,
Monaco, Malta, Cyprus, San Marino, Mauritius, Seychelles, Aruba,
Bahrain, Netherlands Antilles, Tonga, and Liechtenstein, whilst
finance centres such as Luxembourg, Switzerland and the City of
London act as "factory ships" ashore.
6. If Human Rights can be considered as
a product of 18th century thinking and political action then the
historical pedigree for OFCs is of much more ancient origin. From
the 14th century, the Channel Islands of Jersey, Guernsey, Alderney
and Sark were major centres for the smuggling of English wool
to foreign markets. This lucrative trade was very damaging to
the economic well being of English merchants, weavers and the
Customs revenue. Nevertheless, it carried on largely unchecked
through six centuries. By the time that Human Rights started to
be demanded in the 18th century the smuggling trade had expanded
to world wide dimensions and concerned virtually any commodity
or trade which was taxed or restricted. British Government efforts
to suppress the smuggling trade were halfhearted and ineffective.
The Revestment and Mischief Act of 1765, for example, was intended
to buy out the rights of the overlords in the Isle of Man and
stop the business in that little place. It failed.
7. From the smuggling business of previous
centuries the current role of the Channel Islands and the Isle
of Man as so called "offshore finance centres" has evolved.
Now, as then, the Islands own governments still offer the same
old claim that "it's not against our laws".
8. Collectively, the OFCs around the world
are to be considered as a substantial economic power and yet they
are ignored in the context of Human Rights by the FCO and many
others. Modern day smuggling and its relationship with world commerce
is a developing and expanding concern which is attracting the
attention of many influential bodies such as the UN, EU, OECD,
IMF and NGOs the world over.
9. It is to be regretted, though, that the
FCO seems not yet to have woken up to the enormity of the OFC
problem especially with regard to Human Rights obligations and
aspirations.
10. In my previous memorandum submitted
in 2001 I dealt specifically with conditions in Jersey. I indicated
that this small island (pop 86,000), only half an hour by air
from London, still has no legislation in place against discrimination
of any kind. There are plans for reform but there is still no
minimum wage or unemployment benefit. Parish welfare is still
administered under a Poor Law and there are no trades union laws
and proper employment protection legislation. There are blatantly
discriminatory and unfair housing laws and no consumer protection
legislation.
11. The Island has an obscure and ancient
legal system with outdated procedures which include extensive
use of French language and few law books published since the 19th
century.
12. Jersey has still not implemented a human
rights act (in accordance with the European Convention on Human
Rights) and has not even ratified such major human rights instruments
as the UN Conventions on the Rights of the Child, the Elimination
of Discrimination against Women or the Council of Europe Social
Charter. So much for Jack Straw' s guarantees on political and
economic well-being and his respect for and dealings with the
rest of the world.
13. I explained that all this exists in
an island which boasts an enormously rich "finance industry"
with hundreds of billions of pounds of assets and which totally
dominates the political and economic life of the whole Island.
14. "Not against our Laws" is
of special significance in places which seek to provide safe haven
for the wealth of other countries, their citizens or their businesses.
OFCs are not just "tax havens". They really serve as
regulation havens and enable all sorts of restrictions and supervision
to be avoided or evaded world wide.
15. "Flags of convenience" have
long been used to avoid proper control of shipping, whether by
regulation of ship construction and maintenance, management, safety
and training of crews or ownership of cargoes. It is significant
that pollution of the seas, loss of life and fraud so often flow
from vessels registered in OFCs. It is advantageous, therefore,
for OFCs to maintain their outdated laws and to lag behind on
international standards for the benefit of those businesses or
even governments who seek to evade the highest standards in trade
and commerce, employment of staff, access to information, taxation
and so on.
16. OFCs provide a world-wide network of
safe havens for those individuals and businesses seeking to avoid
international standards on a wide range of issues. The avoidance
of national taxation through OFCs is just one aspect of the problem.
17. The 2002 Report provides virtually no
information on the standards that prevail around the world's many
OFCs nor does it offer any hint of policies that should apply
towards them. That it ignores those OFCs that fly the British
flag is especially disturbing. If the UK Government fails to demand
in British territories those minimal standards that are required
in foreign countries then the whole human rights initiative is
devalued.
18. "Enron" 12 months ago briefly
focused attention on the international harm that can result from
a huge business failure. OFCs (including Jersey) featured prominently
in the scandal. Little information of their precise use has yet
emerged but it is clearly a worked example of instability, insecurity
and the collapse of economic well-being on a grand scale.
19. The use of OFCs by big business is evidently
intended to deceive employees, shareholders, customers, creditors
and governments but whether their use can serve any useful or
legitimate purpose is not so clear.
20. In the case re EU v RJR Nabisco,
currently before the courts in New York, the plaintiffs include
Belgium, Finland, France, Greece, Germany, Italy, Luxembourg,
The Netherlands, Portugal and Spain. The allegations against the
defendant companies include:
— trading with Russian, Italian and
Colombian organised crime and laundering the proceeds through
OFCs "known for bank secrecy"
— trading with Iraq in violation of
US sanctions and financing the Iraqi regime and terrorist groups
— restructuring the corporate structure
of the RJR Defendants by establishing subsidiaries in OFCs (including
Jersey) to direct and implement money laundering schemes;
— numerous subsidiary schemes that
harm the European Community and each of the Member States named;
and
— racketeering, etc., etc.
21. Clearly, Enron and EU v RJR Nabisco
demonstrate that OFCs play a major role in frustrating the political
and economic well-being of other countries. The two cases are
indicative of a world wide and substantial abuse.
22. It is estimated that the UK Government
could raise up to £85 billion extra in tax revenues if the
leakage through OFCs was stopped. News Corporation, the corporate
empire of Rupert Murdoch operates from a web of 800 subsidiaries,
many registered in OFCs. Similarly, major corporations like Boeing,
Caterpillar, Chevron, Daimler-Chrysler, Eastman Kodak, Exxon,
General Motors, Microsoft have set up companies in OFCs to serve
their commercial purposes but at what cost to the well-being of
their national economic or political life is not known until a
scandal or collapse occurs. There are 17,000 companies registered
in Jersey.
23. Of course, the whole OFC business is
shrouded in secrecy and as the current case in the Jersey courts
involving the Arab state of Qatar amply demonstrates, governments
are just as capable of using OFCs for dubious purposes as are
profit motivated corporations. The Qatar case is concerned with
arms procurement for that country and a slush fund administered
through Jersey-based trusts. So far, the Qatar Foreign Minister
has paid £6 million to the Jersey government to compensate
for the inconvenience caused but the case continues because of
the efforts by the Jersey Evening Post (JEP) to raise reporting
restrictions imposed by the Jersey Courts.
24. The Qatar case has, in fact, become
one of human rights denied and the JEP is fighting to protect
the rights of free speech and expression and that justice must
be seen to be done. The threats to Human Rights are here imposed
in the interests of the OFC and to deny political and economic
well being to others.
25. In the l990s, Venezuelan bankers used
some 3,500 OFC based corporations to loot banks in Venezuela,
resulting in the collapse of one half of the banks in that country.
This was, of course a disaster for the people of Venezuela and
rendered the country unstable and unpredictable in its dealings
with the rest of the world. It is not unique.
26. According to Oxfam (Report 2000 "Tax
Havens; Releasing the Hidden Billions for Poverty Eradication");
"The offshore world provides a safe haven
for the proceeds of political corruption, illicit arms dealing
and the global drugs trade, thus contributing to the spread of
globalised crime and facilitating the plunder of public funds
by corrupt elites. This contributes to increasing criminality
and hampers the development of transparent budget processes in
poor countries."
and
"The offshore system has contributed
to the rising incidence of financial crises that destroy livelihoods
in poor countries. Tax havens and OFCs are now central to the
functioning of global financial markets. Currency instability
and the rapid surges and reversals of capital flows to developing
countries have become defining features of global financial markets
in recent years and have contributed to financial crises. Following
the recent crisis in East Asia, the Indonesian economy underwent
a severe contraction and the number of people living in poverty
doubled to 40 million."
27. It is way beyond the scope of this brief
memorandum to catalogue the totality of the scandals that flow
from OFCs world-wide. I seek only to demonstrate that a major
problem exists and that this is a matter to be addressed in the
context of human rights. I find it absurd and wholly unacceptable
that a so called "Human Rights Report" can fail in its
250 pages even to acknowledge the problem.
28. Because organisations such as the EU,
IMF, and OECD have been active in recent years regarding the regulation
of aspects of OFC commercial activities there is a greater general
awareness and the promise of some improvements. Unfortunately,
the pressure from these organisations has not been human rights-based
but more designed to clean up and legitimatize OFC activities
and to give them a respectable face. The prospect of closing down
OFCs or to question whether the world actually needs them at all
does not seem to be on the agenda.
29. One result is that the OFCs are becoming
more aggressive in self promotion because similar standards of
"due diligence", "know your client", and non
resident corporation tax rates are being imposed under the pretence
of creating a "level playing field" for all OFCs.
30. Jersey Finance has been busy this year
promoting its OFC services in the United Arab Emirates (UAE) and
Bahrain. Not only has this promotional initiative been fully supported
by the Jersey Government and the Director of Jersey's Financial
Services Commission (supposedly the regulator !) but the Westminster
Government has been reported as fully supportive too.
31. It should be noted that both the UAE
and Bahrain are listed in Annex 5 of the 2002 Human Rights Report
"Status of Ratification of the principal international human
rights treaties" and that their entries make dismal reading.
32. It is especially significant that Jersey
should be seeking now to promote itself in countries with similarly
low human rights aspirations and which are trying to establish
or promote their own Middle East based OFC activities too.
33. Jersey' s disregard for the rights of
children or women or trades unionists or for the elimination of
discrimination and so on— all as recognised under the principal
international treaties—accords with the world-wide pattern
of OFCs being human rights havens. This undesirable status has
huge implications for the well-being of residents of OFCs as well
as the greater millions of people world-wide who may suffer as
a direct result of OFC non compliance.
34. It is odd, at least, that places like
Jersey are allowed to occupy a seat at the table of Commonwealth
or Anglo Irish Council meetings under British patronage, without
having achieved comparable British standards on Human Rights.
33. It is even more odd that the Channel
Islands and the Isle of Man have a charmed relationship with the
EU (negotiated by the UK Government), which has not exposed them
to human rights scrutiny or audit like Turkey and other countries
that now seek to join.
36. Gibraltar has been omitted from the
2002 Report. In view of the heated discussions, public protests
and the referendum that took place this year the omission is especially
strange. Since fundamental human rights issues have already been
judged in the European Court of Human Rights in the case Matthews
v UK concerning the right of Gibraltarians to participate
in EU elections, the Report's silence is ominous.
37. In my previous memorandum for 2001 I
drew attention to the fragmented approach of the UK Government
in its dealings with the Crown Dependencies and other Overseas
Territories even though they share many common problems. I believe
that there is an even more urgent need now to initiate reforms
which allow a proper dialogue between the peoples of all the small
territories and the Westminster government. It is not satisfactory
to have a Westminster MP appointed by the Lord Chancellor's Department
as a so-called "Minister for the Channel Islands" (for
example) if that appointee has no real relationship with the people
of those Islands and cannot be approached by them.
38. I previously lamented the failure to
help promote human rights in the Islands especially since there
was every discouragement in practical terms to the forming of
NGOs in such small territories. I especially complained that the
UN reporting system was rendered virtually meaningless without
comment being made by NGOs before the various UN Human Rights
Committees. I believe that an initiative should be promoted by
the UK Government to stimulate NGO activity and by such bodies
as the Westminster Foundation or British Council to promote Human
Rights education throughout the small territories.
39. I suggest that the existing casual approach
to human rights promotion in the Channel Islands is failing to
achieve the standards actually expected of the UK Government in
accordance with UN and Council of Europe obligations. I suspect
that a similar complaint might be made with regard to the more
distant territories.
40. It is accepted that the smallness of
the Dependent and Overseas Territories presents special problems,
not least of a bureaucratic nature, in achieving the human rights
standards laid down in so many conventions and treaties. However,
it is also recognised that the excuse of "smallness"
is also a very convenient one for OFC dominated islands to put
forward as reason for non-compliance. Human rights are all about
"Universal standards" and the UK Government has a duty
to actively promote them in all places but especially those that
fly the British flag. Smallness is not being claimed as an excuse
against implementing the various anti-money laundering or assistance
to terrorists measures.
41. "Offshore finance" appears
as an attractive business to small territories because it promises
speedy wealth generation where other opportunities do not exist
or have declined. As it is developing world-wide, OFC business
is less and less compatible with human rights standards from an
international perspective and is likely, in any case, to create
as many social problems for small host communities as it solves.
Jersey is just one example where the finance business has grown
to dominate all other economic activities, so much so, that the
island population is now wholly dependent upon OFC wealth for
its survival.
42. How established OFCs like Jersey might
be enabled to reduce their reliance upon the finance business
and to succeed in the global economy with a more stable and secure
enterprise is beyond the scope of this memorandum. However if
Jack Straw' s words on the "enjoyment of human rights
is an excellent guarantee of political and economic well-being"
have any substantial meaning, then I would hope that the active
promotion of human rights standards in all OFCs will be a UK government
priority soon.
Michael Dun
Jersey
12 December 2002
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