House of Commons - Foreign Affairs

Select Committee on Foreign Affairs Written Evidence

Submitted by the FCO

This memorandum is provided in response to an invitation from the Select Committee on Foreign Affairs to provide information on the exercise by the Foreign and Commonwealth Office of its responsibilities in relation to the Overseas Territories and the FCO's achievements against Strategic Priority No 10, the security and good governance of the Overseas Territories.[86]

CONTENTS

Introduction and Overview Paragraphs 2-28

Standards of Governance in the Overseas Territories Paragraphs 29-31

The role of Governors Paragraphs 32-38

The Overseas Territories Consultative Council Paragraphs 39-40

Transparency and Accountability Paragraphs 41-44

Regulation of the Financial Sector Paragraphs 45-54

Constitutional Amendment Paragraphs 55-64

International Treaties and Conventions Paragraphs 65-68

Human Rights Paragraphs 69-75

Parliamentary Relations Paragraphs 76-80

The Sovereign Base Areas of Akrotiri and Dhekelia ANNEX A[87]

Constitutional Review Developments ANNEX B[88]

UN Human Rights Conventions: Ratification Table ANNEX C[89]

INTRODUCTION

1. The Terms of Reference given by the Select Committee on Foreign Affairs (FAC) for their inquiry on the Overseas Territories are as follows:

— Standards of governance in the Overseas Territories

— The role of Governors and other office-holders appointed by or on the recommendation of the United Kingdom Government

— The work of the Overseas Territories Consultative Council

— Transparency and accountability in the Overseas Territories

— Regulation of the financial sector in the Overseas Territories

— Procedures for amendment of the Constitutions of Overseas Territories

— The application of international treaties, conventions and other agreements to the Overseas Territories

— Human rights in the Overseas Territories

— Relations between the Overseas Territories and the United Kingdom Parliament

OVERVIEW

2. There are 14 UK Overseas Territories (formerly known as Dependent Territories). They are Anguilla, Bermuda, the British Antarctic Territory, the British Indian Ocean Territory, the Virgin Islands (usually referred to as the "British Virgin Islands"), the Cayman Islands, the Sovereign Base Areas of Akrotiri and Dhekelia in Cyprus, the Falkland Islands, Gibraltar, Montserrat, Pitcairn, St Helena and its dependencies (Ascension Island and Tristan da Cunha), South Georgia and the South Sandwich Islands and the Turks and Caicos Islands. British Antarctic Territory, British Indian Ocean Territory and South Georgia and the South Sandwich Islands (also Ascension Island) have no permanent settled populations. Facts and figures on each Overseas Territory are available on the FCO's Country Profiles pages at www.fco.gov.uk.

Location

3. Gibraltar (to which the EC Treaty applies subject to exceptions provided for in the UK's Act of Accession) and the Sovereign Base Areas in Cyprus (to which the EC Treaty does not apply except to the extent necessary to ensure the implementation of the arrangements set out in the Protocol on the SBAs annexed to the Act of Accession of the Czech Republic and others to the EU) are the only Overseas Territories within the European Union area. Five of the Territories—Anguilla, the British Virgin Islands, the Cayman Islands, Montserrat and the Turks and Caicos Islands—are located in the Caribbean. Bermuda is situated in the North Atlantic, off the east coast of the United States of America on approximately the same latitude as Charleston. The Falkland Islands, South Georgia and the South Sandwich Islands, St Helena, Tristan da Cunha and Ascension are all found in the South Atlantic. Tristan da Cunha is the most remote inhabited island in the world, some 1700 miles west of Cape Town. Pitcairn is situated in the South Pacific Ocean, 1,550 miles south-east of Tahiti. The British Indian Ocean Territory is about 1,100 miles east of Mahé, the main island of the Seychelles, in the Indian Ocean. The British Antarctic Territory comprises that sector of the Antarctic south of latitude 60° south, between longitude 20° and 80° west.

Population

4. The overall population of the Overseas Territories is approximately 200,000. Bermuda has the largest population, at approximately 66,000, while Pitcairn currently only has 47 permanent inhabitants.

History

5. Bermuda is the oldest Overseas Territory—it was acquired by the British in 1612. Five other Territories were acquired during the seventeenth century (Montserrat, 1632, Anguilla, 1650, Cayman Islands, 1670, British Virgin Islands, 1672 and St Helena, 1673). Three Territories, Gibraltar, which was captured in 1704 and acquired in 1713, the Falkland Islands, which was acquired in 1765, and the Turks and Caicos Islands, which was acquired in 1766, were acquired in the eighteenth century. The remaining Territories all came into British possession either in the nineteenth century (British Indian Ocean Territory, 1814, Ascension, 1815, Tristan da Cunha, 1816, Pitcairn, 1838) or early part of the twentieth century (the South Orkneys, the South Shetlands, South Georgia, the South Sandwich Islands and the territory known as Graham's Land, situated in the South Atlantic Ocean to the south of the 50th parallel of south latitude, and lying between the 20th and 80th degrees of west longitude), which were listed by a Letters Patent in 1908 and governed collectively as the Falkland Islands Dependencies. The Falkland Islands Dependencies subsequently became separate Territories—the British Antarctic Terrritory in 1962 and South Georgia and the South Sandwich Islands in 1985.

UK's Responsibility as an Administering Power

6. Under the UN Charter (Article 73), UN members administering Territories whose peoples have not yet obtained a full measure of self-government "recognise the principle that the interests of the inhabitants of these territories are paramount and accept as a sacred trust the obligation to promote to the utmost within the system of international peace and security established by the present Charter, their well-being". The article sets out a series of commitments, including ensuring political, economic, social and educational advancement; just treatment; protection against abuses; and developing self-government. Nowadays the UK has a wide range of specific international obligations in respect of the Overseas Territories, for whose international relations we are responsible, which sometimes cover areas of policy, eg environment, which have been delegated to Overseas Territories Ministers.

UK relationship with the Territories

7. The Overseas Territories are constitutionally not part of the United Kingdom. All of them have separate Constitutions made by an Order in Council. All have Governors, except for the British Indian Ocean Territory, British Antarctic Territory and South Georgia and the South Sandwich Islands, which have Commissioners (the Commissioner of the British Indian Ocean Territory and the British Antarctic Territory is the Head of the Overseas Territories Directorate in the FCO in London. The Falklands Islands Governor is the Commissioner for South Georgia and the South Sandwich Islands). The Governor of St Helena is also Governor of its Dependencies (Ascension and Tristan da Cunha), although each has a resident Administrator. Each Governor is appointed by and represents Her Majesty The Queen. The Governor both represents Her Majesty in the Territory, and represents the Territory's interests to the UK Government.

8. The degree of self-government enjoyed by a Territory depends on its stage of constitutional development. Bermuda has almost full internal self-government, with a Premier presiding over a Cabinet, whose meetings the Governor does not attend. The situation is similar in Gibraltar where the Chief Minister heads the Council of Ministers; the Governor meets regularly with the Chief Minister but does not attend the meetings of the Council of Ministers. By contrast Ascension, Tristan da Cunha and Pitcairn have only advisory Councils, and the Governor is the law-making authority. More advanced Overseas Territories' constitutions provide for a Governor, an Executive Council (ExCo) or Cabinet, and usually a single chamber legislature known as the Legislative Council or in some Territories the House of Assembly (Bermuda is the only Overseas Territory which has two chambers). In most Territories, the Governor has special responsibility for defence, external affairs, internal security, including the police, the public service, and the administration of the courts. In Anguilla, Montserrat and TCI this extends to international financial services and in St Helena to finance and shipping. In relation to matters within their special responsibilities, Governors are usually required to consult the Chief Minister or Premier but are not bound to accept the advice of ExCo. However even in areas of special responsibility, the Governor depends on the local government to include financial provision for such services, eg the police, in the budget; and on their support to get the relevant appropriation measures through the local Legislature.

9. Most Overseas Territories' Constitutions also provide for certain reserve powers to protect the UK Government's overall responsibility for the good governance of the Overseas Territories. These include the power of Her Majesty acting through a Secretary of State to instruct the Governor in the exercise of his functions; the power to disallow Overseas Territories legislation; and the power to legislate by Prerogative Order in Council. For Bermuda, however, the UK may only legislate by Act of Parliament, or by Order in Council under an Act of Parliament. In most Territories, the Governor also has certain reserved powers. But in most instances, these cannot be exercised unless he/she has first consulted, or received instructions from, a Secretary of State. Unless these powers are exercised, the Governor is usually bound by the advice of ExCo on matters outside his special responsibilities. In some Territories the Governor also has reserved legislative powers.

10. A review of the relationship between Britain and the Overseas Territories led to the publication of a White Paper "Partnership for Progress and Prosperity" in 1999. The White Paper has been the cornerstone for the FCO's work on the Overseas Territories since then. A review of the White Paper policy conducted by a Foreign and Commonwealth Office official in 2003 concluded that we should maintain the existing policy while increasing our efforts on good governance.

Citizenship

11. One of the 1999 White Paper's commitments was to offer British citizenship—and so the right of abode in the UK—to those British Dependent Territories citizens who did not already enjoy it. Provision for this was included in the British Overseas Territories Act 2002 which gave British citizenship to almost all persons who held the status of British Overseas Territories citizen immediately before 21 May 2002[90]. This was accomplished on a non-reciprocal basis as far as the right of abode was concerned. British Dependent Territories citizenship was renamed British Overseas Territories citizenship by the 2002 Act.

External Relations

12. As noted above, the Governor (or Commissioner) is responsible in each Territory for its external relations. For this reason, if any Territory government wants to enter into any binding international commitment, it is required to seek UK Government authority known as an entrustment to do so. Apart from Gibraltar (to which the EC Treaty applies subject to exceptions provided for in the UK's Act of Accession) and the Sovereign Base Areas in Cyprus (to which the EC Treaty does not apply except to the extent necessary to ensure the implementation of the arrangements set out in the Protocol on the SBAs annexed to the Act of Accession of the Czech Republic and others to the EU), none of the Territories is within the EU. With the exception of Gibraltar, Bermuda and the Sovereign Base Areas of Cyprus, the Overseas Territories' relationship with the EU is governed by an "Overseas Association" Council Decision. This is an instrument that is negotiated every ten years between the Commission and Member States. The Territories are not involved directly, but are consulted by their "parent" Member State (ie the UK). Under the most recent 2001 Decision, some Territories have been allocated varying amounts of European Development Fund (EDF) finance to support national development programmes. All Overseas Territories covered by the Decision, and with settled populations, are eligible for EDF regional development funding; and have access to a range of community development budget lines and regional funding schemes. The Decision also contains a number of trade, customs and loan financing provisions; and provides for an annual forum to enable Chief Ministers/Premiers to meet directly with the EU Development Commissioner and other senior Commission officials.

13. In the Caribbean, Montserrat is a full member of the regional organisation, the Caribbean Community (CARICOM). Anguilla, Bermuda, the British Virgin Islands, the Cayman Islands and the Turks and Caicos Islands are associate members. Montserrat is also a full member of the Organisation of Eastern Caribbean States (OECS), of which Anguilla and the British Virgin Islands are associate members. The Caribbean Territories are members or associate members of a number of other regional organisations.

14. Beyond this, the Overseas Territories are included in British delegations to certain international meetings where they have an interest, and certain Commonwealth meetings, eg of Commonwealth Law, Finance, and Education Ministers, Commonwealth Senior Officials and Commonwealth Health Ministers. Members of the legislatures of the Overseas Territories have long enjoyed membership of the Commonwealth Parliamentary Association on an equal footing with full Commonwealth members.

Territory Economies

15. The size of the Territories' economies, and their level of prosperity, differ significantly. The largest Overseas Territory—Bermuda—has an economy roughly the size of all the other Overseas Territories put together; and has one of the world's highest incomes per capita—estimated at over US$75,000. It also has the largest number of captive insurance companies in the world (annual premiums: £32 billion); and the world's largest catastrophe re-insurance capacity (one-third of all premiums). Three other Territories—the Cayman Islands, the British Virgin Islands and Gibraltar—have GDP per capita above that of the UK (although because of the narrow economic base and the questionable data used, GDP figures for the Territories are sometimes misleading). In contrast, Montserrat, St Helena and Pitcairn are in receipt of budgetary aid from DFID. Some of the Overseas Territories are leading global players in specific offshore financial sectors—Bermuda in insurance, the Cayman Islands in financial services (especially banking and hedge funds); and the British Virgin Islands in licensing international business companies (IBCs). Gibraltar is also increasing its share of this market. There are other important activities in specific Overseas Territories, eg fishing licences in the Falklands and South Georgia, shipping, financial services and tourism in Gibraltar, etc.

16. While the economies of many of the Overseas Territories have improved in recent years they are largely based on the twin pillars of international finance and tourism, both of which are excessively vulnerable to external factors. Most Overseas Territories have searched for a third pillar to guarantee greater stability but largely without success. In Anguilla, the Cayman Islands, Pitcairn and the Turks and Caicos Islands, there is no income tax (Bermuda and BVI have a payroll tax). Customs/import duties are an important source of revenue for most Territories. In those with significant financial centres, company fees and licences play a major role. In the Falklands and South Georgia the majority of revenue is derived from fishing licence fees.

17. The Overseas Territories do not make any direct contribution to the British Exchequer, except in some cases a contribution towards the cost of the Governor and his staff and the operation of Government House. The level of this contribution varies from Territory to Territory.

Contingent Liabilities

18. Given the UK's responsibilities, there exists a continuing exposure to potential liabilities resulting from actions of the Overseas Territories. Some of the UK's contingent liabilities have a legal basis, eg in the case of treaties applying to the Overseas Territories such as the European Convention on Human Rights, which applies to most Overseas Territories. The UK is also responsible for ensuring that Gibraltar implements any EC legislation which is applicable to it. In the event that Gibraltar fails to implement, the UK could be subject to infraction proceedings by the Commission. But even in the absence of legal liability, if the resources of the Governments of the Territories' were insufficient, the UK might find itself politically, or morally, obliged to pick up the bill for any Overseas Territory that had incurred liabilities it could not itself meet.

19. Against this background, in the last two decades the UK has spent sums running into billions of pounds on defending the Falkland Islands. It has also provided £250m in development assistance to Montserrat since the volcano crisis in 1995/96, plus ongoing UK programme funding of £15m per year. A major problem with a key sector of the local economy (eg tourism, financial services) could lead to its stagnation or even collapse, and calls for HMG support. Other liabilities could result from the offshore financial sector and costs arising from criminal activity. Although the UK Government is careful to avoid incurring legal liability, it would face moral pressure in the event that an Overseas Territory became unable to service its own debt.

20. To mitigate the risk of excessive Overseas Territory borrowing creating liabilities for the UK, we have introduced Borrowing Guidelines for those Overseas Territories that wish to undertake borrowing. The guidelines define three ratios, which together specify a prudential framework for Overseas Territory Government and Government-guaranteed borrowing. The ratios impose maximum limits for the total volume of outstanding debt and the annual cost of debt-service, and a minimum level for Government reserves. If all three ratios are not met, further Overseas Territory borrowing will not ordinarily be approved by the UK Government. Separate (pre-existing) arrangements apply for Bermuda and Gibraltar.

21. Contingent liabilities in the Overseas Territories were the subject of a National Audit Office report in 1997. Another NAO inquiry on contingent liabilities has been undertaken in 2007 and a report will be presented to the Public Accounts Committee towards the end of the year.

Disaster/Crisis

22. Contingent liabilities could also be incurred as a result of natural and man-made disasters and terrorist incidents. The Overseas Territories, especially those in the Caribbean, are particularly prone to the former. The primary threat is from the annual hurricane season. Cayman, for example, suffered $3.5 billion of infrastructure damage following Hurricane Ivan in September 2004, which was met largely from Cayman's own financial resources. But other potential disasters range from earthquakes (eg British Virgin Islands) to volcanic eruptions (eg Montserrat) and tidal waves. Insurance could be expected to cover some, but by no means all, of the losses in the event of such disasters. Global climate change and the expected rise in sea levels will have an adverse impact in the British Indian Ocean Territory and the Caribbean. A rise in sea level could also affect adversely the lower reaches of Gibraltar, particularly the isthmus between the Rock and mainland Spain, on which the airport is situated.

23. The heavy dependence of many Overseas Territories on tourism means they are vulnerable to non-natural disasters, such as on- and offshore fires, explosions, collisions, pollution, air accidents, ferry or cruise line accidents, oil tanker spills etc; and generally to potential problems linked to aviation and maritime safety and security. There is also the potential vulnerability of tourist targets to terrorist attacks.

Sovereignty Disputes

24. Although there are some outstanding issues over territorial and maritime boundaries of some of the Overseas Territories, the majority is not subject to serious dispute. The chief exceptions are the two territories of the Falkland Islands and South Georgia and the South Sandwich Islands, both of which are subject to Argentine sovereignty claims; and Gibraltar, over which Spain maintains a sovereignty claim.

25. The UK has no doubt about its sovereignty over both the Falkland Islands and South Georgia and the South Sandwich Islands. The UK made the first territorial claim to part of Antarctica in 1908 by Letters Patent: and has maintained a permanent presence in the British Antarctic Territory since 1943. But most of British Antarctic Territory itself is counter-claimed by either Chile or Argentina. To establish a mechanism that would defuse escalating disputes over sovereignty (by the 1950s five-sixths of the Antarctic continent was claimed by seven states—Britain, Argentina, Australia, Chile, France, New Zealand and Norway), claimant and non-claimant states negotiated the Antarctic Treaty, which was adopted in 1959 and entered into force in 1961. Its objectives are: to keep Antarctica demilitarised; to establish it as a nuclear-free zone; to ensure that it is used for peaceful purposes only; to promote international scientific co-operation in Antarctica; and to set aside disputes over territorial sovereignty.

26. Sovereignty is also an ongoing issue for Gibraltar, where Spain recognises British sovereignty over the Rock, but not over the isthmus, waters surrounding the Rock (with the exception of the port), or adjoining the isthmus, or airspace over the entire Territory. The UK supports the right or principle of self-determination, but this must be exercised in accordance with the UN Charter and with other treaty obligations. In Gibraltar's case this includes the 1713 Treaty of Utrecht, whereby sovereignty over the Rock was ceded to Britain, but the Treaty provides that, were the UK to relinquish sovereignty, the right of first refusal would be given to Spain. Thus independence would only be an option with Spanish consent. The UK has repeatedly made it clear, however, that it will not enter into any arrangements under which the people of Gibraltar would pass under the sovereignty of another state, against their freely and democratically agreed wishes. Furthermore the UK has made it clear it will not enter into a process of sovereignty negotiations with which Gibraltar is not content.

27. In addition, after the British Indian Ocean Territory was created in 1965 and set aside for defence use by treaty with the United States, the UK gave Mauritius an undertaking in 1980 to cede the Chagos Islands to Mauritius when they were no longer required for defence purposes (subject to the requirements of international law). However, since 1980, successive Mauritian governments have asserted a sovereignty claim to the islands, arguing that they were detached illegally from Mauritius before that country's independence. The UK has consistently rejected these claims, but repeated the undertaking to Mauritius given in 1980.

Environment

28. The Overseas Territories are environmentally very rich and varied:

— The British Indian Ocean Territory contains the Great Chagos bank, one of the world's largest atolls;

— There are more than 200 endemic plant species in the Overseas Territories. Most occur on St Helena (46);

— The Overseas Territories in the South Atlantic provide important breeding grounds for many species of birds, including albatrosses, frigate birds and penguins;

— Henderson Island, in the Pitcairn Group, is the Pacific's best large raised coral atoll.

— The British Antarctic Territory is also highly significant as a global laboratory. Scientists from the British Antarctic Survey discovered the ozone hole there in 1985, so triggering international concerns about the effects of atmospheric pollution. The Antarctic's pristine environment is a critical barometer of the world's climate health. Monitoring change in Antarctica allows us to predict possible changes in global conditions, eg if the West Antarctic ice sheet melted, the sea level world-wide would rise six metres, wipe out some countries, including some of the Overseas Territories, and cause major flooding elsewhere in the world.

STANDARDS OF GOVERNANCE IN THE OVERSEAS TERRITORIES

29. Good governance is part of the partnership between the UK and its Overseas Territories set out in the 1999 White Paper, which highlighted the importance of providing governance of a high quality. We continually underline the importance of good governance

30. The UK Government proposed at the 2005 Overseas Territories Consultative Council (OTCC) that all the territories should endorse a paper setting out agreed principles. This was discussed again at the 2006 OTCC where agreement was reached and the document was published on the FCO's website and in the territories.

31. The extent to which the UK can and should use its powers effectively to maintain standards of governance in the Overseas Territories has to be considered against the aim of ensuring that territory governments themselves should be given the maximum possible accountability and responsibility for their actions. This is especially true in areas which have been devolved to the governments concerned. Auditors General and Ombudsmen are usually appointed by the Governor and we work to ensure that their independence is maintained and they are not subject to undue political pressure.

THE ROLE OF GOVERNORS AND OTHER OFFICE-HOLDERS APPOINTED BY, OR ON THE RECOMMENDATION OF, THE UNITED KINGDOM GOVERNMENT

32. Responsibility for the security and good government of the Overseas Territories falls to the Secretary of State. Responsibility within the Territory rests with the Governor who is appointed by HM The Queen on the advice of the Secretary of State. The term "Governor" is a general term used administratively and covers the Governors, Commissioners and Administrators described in paragraph 7 above. The Governor of the Falkland Islands is also the Commissioner for South Georgia and the South Sandwich Islands.

33. Each Governor is responsible to the Secretary of State and, through him, to The Queen and the UK government, for the security and proper governance of the Territory (an Administrator's line of responsibility runs through his/her Governor).

34. Specific duties are laid on the Governor by the Constitution and legislation of the Territory itself and by the Secretary of State's instructions. These vary from Territory to Territory, but those allocated by the Constitution usually include defence, internal security, foreign affairs, the administration of the courts, and the public service, and—in some Overseas Territories—international financial services. Security is generally taken to include overall responsibility for the Police and Prison Services, planning for natural disasters, and the increasingly important areas of air and maritime safety and security.

35. Given the Secretary of State's responsibility, the Governor needs to be actively involved in a range of issues, for example human rights, the environment, drugs and international crime, which impact directly on the UK and its obligations, and with wider issues of good governance, financial integrity in the public sector, and sustainable economic development.

36. The majority of Overseas Territories have a directly elected legislature (Legislative Council (LegCo), Legislative Assembly (LA), House of Assembly, or Parliament) on the lines of the Westminster Parliament. Executive authority in most Territories is shared between the Governor and the Executive Council (ExCo) (known in some Territories as Cabinet). Bermuda and Gibraltar apart, the Governor chairs ExCo.

37. Although the responsibilities are extensive, the Governor's powers are constrained by the need for the Territory's Government to make suitable financial provision, including for those responsibilities specifically allocated to the Governor under the Constitution. The Governor therefore has to work very closely with the elected Government often relying on powers of persuasion rather than any specific executive authority. The powers to refuse to assent to (and thus to veto) legislation can in most Territories only be exercised with the consent of the Secretary of State and can be used only in the most exceptional circumstances.

38. The role of the Governor has frequently been discussed at the Overseas Territories Consultative Councils over the years and Chief Ministers and equivalents have sought to scale down the already narrow powers vested in the Governor. A document describing the UK relationship with the Overseas Territories, and in particular the role of the Governor, was distributed at the 2003 OTCC. An updated version was circulated to Chief Ministers with a letter from the FCO Minister for the Overseas Territories in June 2007.

THE WORK OF THE OVERSEAS TERRITORIES CONSULTATIVE COUNCIL

39. The Overseas Territories Consultative Council was established in 1999 as a forum for discussion of key policy issues with heads of territory governments. The Council meets once a year in London. The meeting is chaired by the FCO Minister who has specific responsibilities for Overseas Territory issues, with other UK Government Ministers and senior officials participating during relevant sessions on the agenda. The 2006 OTCC (the eighth) included sessions on aviation and maritime security, good governance and ethics, human rights, a criminal justice strategy, climate change and combating international corruption.

40. Governors of the Overseas Territories attended the 2003 and 2006 OTCCs but their participation was not welcomed by all the Chief Ministers, who wanted the Council to be kept as a political forum for elected representatives. Lord Triesman wrote to Chief Ministers in April 2007 suggesting that the 2007 OTCC should include one day for political talks and one day for discussions on operational issues to which Governors would be invited. Given the Governors' responsibilities, outlined above, a meeting on operational issues without the active participation of both Chief Ministers and Governors would not be effective.

TRANSPARENCY AND ACCOUNTABILITY IN THE OVERSEAS TERRITORIES

41. The Foreign and Commonwealth Office is responsible for promoting good governance in the Overseas Territories which includes ensuring the transparency of decisions by the executive and legislature in line with rules and regulations, and the accountability of government to the public and the legislature. It is relevant in all areas of government eg provision of services, award of contracts, allocation of benefits; and in the financial sector in particular.

42. As noted above in the section on the role of the Governor, most Territories have a directly elected legislature and the Governor has some clearly defined executive responsibilities. Most Territories' Constitutions also include a form of parliamentary scrutiny, including a key role of a Committee of Public Accounts. However, formal scrutiny is generally infrequent and in most Overseas Territories, significantly less comprehensive or effective than in the UK. The main limiting factors are that:

— Most legislatures are too small to provide enough "back-bench" members to staff scrutiny committees, besides the essential Ministerial posts.

— Members of Committees drawn from governing parties can be concerned not to appear disloyal to their government, which can prevent the achievement of Committee quora and the production of agreed reports. Politicisation of Committee proceedings is often perceived where Public Accounts Committees are chaired by Leaders of the Opposition, or where politically sensitive topics are chosen, and where the distinction between ministerial policy and administration by officials is blurred or not well understood.

— Expertise and awareness of how to conduct Scrutiny Committee proceedings can be low.

— Not all Territories have a Committee of Public Accounts or similar scrutiny body, and some that do meet only in private.

— There is little investigative journalism in most Overseas Territories and the local media can be reluctant to expose Government weaknesses for fear of retribution.

43. The Governor and the public service in the Overseas Territories therefore have an important role to play in ensuring that appropriate checks and balances are maintained. The Good Governance principle agreed at the 2006 OTCC includes acknowledgement that decisions by both the executive and legislature should be taken (and be seen to be taken) and implemented in line with defined rules and regulations. It also means that (subject to limited exceptions) information must be freely available and directly accessible to those who will be affected by such decisions and their implementation. The principle also requires the provision of an appropriate level of information, in an easily understandable form, by government and the public service to the public, and media.

44. The FCO works to ensure that Government institutions and the legislature in the Overseas Territories, as well as the private sector and civil society organisations, are accountable to the public and, where appropriate, to their institutional stakeholders. Governors have a role to play to encourage accountability and to bolster the wider civil society.

REGULATION OF THE FINANCIAL SECTOR IN THE OVERSEAS TERRITORIES

45. The UK Government remains committed to promoting greater transparency and co-operation in global regulation and expects the Overseas Territories to fully comply with international norms on the exchange of information. All financial centres, whether onshore or offshore, should match up to the highest standards of financial regulation and provide effective co-operation with international counterparts; this promotes greater confidence in the jurisdiction and will ensure the long-term viability of the Overseas Territories' finance sector.

46. It is critical that, in the current global financial climate, Overseas Territories deal decisively with impediments to international co-operation, poor implementation of standards and have effective safeguards against the threats of money laundering and terrorist financing.

47. The 2000 KPMG reviews (see paragraph52) (which were part-funded by the Overseas Territories) showed considerable leadership by Overseas Territories on financial issues. Since then, all the Overseas Territories have been subject to independent international evaluations and have played a major role in regional anti-money laundering bodies. Good progress has been made on financial regulation in some Overseas Territories, but in others a lot more is needed to deliver the standards that the Overseas Territories all say they agree to, particularly relating to the effective implementation and enforcement of laws. Overseas Territories have shown their commitment to high standards but the limited availability of expensive resources is a factor which explains why some Overseas Territories may struggle to keep legislation and the application of regulations up to the latest international standards.

48. Good regulation supports the aspirations of the Overseas Territories to provide quality financial services in an international market place, provided international standards are maintained. This is in the best interests of Overseas Territories, because good regulation is good for business.

49. The UK Government supports this agenda and we work with key stakeholders to bring practical support and technical assistance when opportunities arise. But we will always seek to ensure that the great opportunities of global financial markets are not abused or undermined. The UK looks to Overseas Territories to respond proactively and quickly to outstanding recommendations on financial regulation—just as we do for all other financial centres.

Background—UK interests in Overseas Territories' financial services

50. All the Caribbean Overseas Territories, Bermuda and Gibraltar have established offshore financial centres to varying degrees. Bermuda commands one third of the world's reinsurance business; Cayman is the worlds fifth biggest banking centre and hosts 80% of the global hedge fund market and BVI dominates the global market for international business companies.

51. UK Government interest in this business stem from its objectives of:

— Maintaining financial stability—The more significant offshore financial centres may act as a link through which shocks to the financial system are transmitted internationally.

— Supporting international standards—The UK has a leading role in a number of international institutions (eg the Financial Action Task Force—the international standard setter on money laundering) aimed at enhancing the quality of global financial standards.

— Managing the reputational risk, and the risk of contingent liabilities to the UK. All Overseas Territories' economies are significantly reliant upon revenue from financial services business and a substantial downturn in this sector, for whatever reason, could result in pressure on the British Government to provide direct economic aid.

52. The 1999 White Paper stated that Overseas Territories should match current international standards, and identified a number of broad improvements where progress was needed. In order to determine the precise requirements for each Overseas Territory, a formal review ('the KPMG review') was launched to assess each jurisdiction in turn. Since the KPMG review, the IMF has introduced a surveillance programme covering all offshore financial centres which has echoed the KPMG recommendations and has made some additional ones of its own. There is also significant international pressure for poorly regulated offshore financial centres to be the subject of international countermeasures.

53. Our goal is for all Overseas Territories to fully implement international standards of regulation and supervision. Standards and regulatory capacity in some Overseas Territories in some areas are as good as anywhere else in the world. But in some areas we have continued concerns; and we are working closely with the Governments of the Territories to improve them. Because international regulation and best practice is continually evolving, even the better performing (and richer) Overseas Territories, have a number of international recommendations awaiting action.

54. We need to recognise that there is significant international pressure to limit the role of the Overseas Territories in providing international financial services. The Overseas Territories are often expected to apply higher standards of regulation than some OECD countries. If the pressure were to succeed to the point where the economies of the main Overseas Territories providing these services were to be adversely affected, there are few options for replacing lost Government revenue in other sectors. The UK Government's position is to require, as far as possible, that Overseas Territories meet the highest levels of regulation while supporting the Territories in the area of international finance.

PROCEDURES FOR AMENDMENT OF THE CONSTITUTIONS OF OVERSEAS TERRITORIES

Legal and parliamentary background

55. The Constitution of each Overseas Territory is set out in an Order in Council made under statutory powers or in exercise of the Royal Prerogative. The Orders in Council contain the current Constitutions of the Overseas Territories. The relevant statutory powers, and the Territories to which they relate, are the following—

— British Settlements Acts 1887 and 1945: Ascension Island; British Antarctic Territory; Falkland Islands; Pitcairn; South Georgia and South Sandwich Islands; Tristan da Cunha

— West Indies Act 1962, sections 5 and 7: Cayman Islands; Montserrat; Turks and Caicos Islands; Virgin Islands

— Bermuda Constitution Act 1967, section 1: Bermuda

— Anguilla Act 1980, section 1(2): Anguilla

— St Helena Act 1833 (formerly entitled Government of India Act 1833), section 112: St Helena

— Cyprus Act 1960, section 2(1): Sovereign Base Areas of Akrotiri and Dhekelia

— Royal Prerogative: British Indian Ocean Territory; Gibraltar

56. Except for the Anguilla Act and the Cyprus Act, the required parliamentary procedure under each of the statutes listed above is that the Order in Council must be laid before both Houses of Parliament after being made. Orders in Council made in exercise of the Royal Prerogative are not subject to any parliamentary procedure. Nor are Orders in Council made under section 1(2) of the Anguilla Act 1980 and section 2(1) of the Cyprus Act 1960.

57. By exchanges of letters dated 18 June 2002 and 12 July 2002, and 23 October 2002 and 14 November 2002, between the then Chairman of the Foreign Affairs Committee, Donald Anderson MP, and the then Secretary of State for Foreign and Commonwealth Affairs, Jack Straw MP, it was agreed that constitutional Orders in Council relating to the Overseas Territories would be sent in draft to the Committee, if possible no later than 28 days before being submitted to Her Majesty in Council, subject to the qualifications set out in those letters.

Constitutional changes short of independence

58. Changes to the Constitution of an Overseas Territory short of independence are effected by Order in Council in exercise of the powers described in paragraph 55 above. These can take the form either of amendments to the existing Constitution or the revocation of the existing Constitution and its replacement by a new Constitution.

59. The 1999 White Paper, "Partnership for Progress and Prosperity, Britain and the Overseas Territories", stated at paragraph 2.7: "The Overseas Territories believe that their constitutions need to be kept up to date and where necessary modernised. Each Overseas Territory is unique and needs a constitutional framework to suit its own circumstances. Suggestions from Overseas Territory governments for specific proposals for constitutional change will be considered carefully." This marked a major shift from previous practice where the process of constitutional review and change had been driven by the UK Government, often through a constitutional commission appointed by it.

60. In several Territories, a local constitutional review commission has carried out a process of public education and consultation leading to the publication of a report with recommendations for change. In Gibraltar and the Falkland Islands, this task was carried out by a committee of the local legislature. These reports have then been debated locally, and have led to discussions between the Territory concerned and the FCO. New Constitutions have been agreed for Gibraltar, the Turks and Caicos Islands, and the British Virgin Islands. The process is less advanced in other Territories. ANNEX B describes developments in those Territories where constitutional review is or has been active.

Constitutional change—Independence

61. Paragraph 2.1 of the 1999 White Paper states: "Britain's policy towards the Overseas Territories rests on the basis that it is the citizens of each territory who determine whether they wish to stay linked to Britain or not. We have no intention of imposing independence against the will of the peoples concerned. But the established policy of successive British governments has been to give every help and encouragement to those territories which wished to proceed to independence, where it is an option."

62. Since the White Paper no Overseas Territory has opted for independence. FCO Ministers have indicated that their presumption is that the route to independence would be by referendum, but a final decision in any Territory would be taken on a case-by-case basis in the light of the circumstances at the time.

63. With the exception of Anguilla, an Act of Parliament would be required to grant independence to an Overseas Territory. In the case of Anguilla, an Order in Council under section 1(3) of the Anguilla Act 1980 would suffice. Such an Order in Council would require to be approved in draft by resolution of each House of Parliament.

64. In accordance with past practice, the independence arrangements for an Overseas Territory, including its Constitution upon independence, would be discussed and agreed with the UK Government at a constitutional conference. A period of between one and two years from the decision to move to independence has usually been required to make the necessary preparations and arrangements, including the necessary legislation.

THE APPLICATION OF INTERNATIONAL TREATIES, CONVENTIONS AND OTHER INTERNATIONAL AGREEMENTS TO THE OVERSEAS TERRITORIES

65. Unless expressly authorised to do so by HMG in the UK (see paragraph 67), Overseas Territories do not have the authority to become party to treaties in their own right, therefore the UK must extend treaties to the Overseas Territories. This is normally done at the time of the UK's ratification, or at some later date. Whitehall Departments have standing instructions that they should consider whether a treaty should be extended to the Overseas Territories at an early stage in the Department's deliberations and it is important that the Territories are fully consulted. The Overseas Territories must then be allowed a proper length of time to consider the implications of having any treaty extended to them. Guidelines on the consultation process were circulated to Whitehall Departments in May 2006. The guidance is available at www.fco.gov.uk/treaty.

66. Consultation with the Overseas Territories regarding extension of a Treaty is a matter of good policy and administration. Where applicable, the views of Overseas Territories may also be required to formulate the UK negotiating position on a Treaty. The UK is responsible under international law for the due performance of treaty obligations undertaken in respect of the Overseas Territories. The UK must make sure not only that an Overseas Territory is willing to accept particular treaty obligations, but also that those obligations can be fulfilled by the Overseas Territory. If they cannot, the UK bears ultimate responsibility.

67. Territories will sometimes want to negotiate and conclude an agreement with a sovereign state or an international organisation where there is no existing UK treaty or similar instrument. In the UK treaty making is part of the Royal Prerogative in matters of foreign affairs. The Crown's representative in an Overseas Territory is the Governor. It is, accordingly, for the Crown to confer upon the Governor the necessary capacity to conclude a treaty. In practice this means that, on the authority of the Secretary of State for Foreign and Commonwealth Affairs, the Governor is formally entrusted with the power to conclude the treaty in question for his Territory. This is generally known as giving the Governor an "entrustment". Nowadays however entrustments are sometimes given directly to the Government of a Territory to negotiate and conclude a Treaty. It is possible for an entrustment to be general, covering all treaties within certain categories. But it is more usual for an entrustment to relate to a particular treaty. An entrustment should be sought by an Overseas Territory prior to commencing the negotiation of an international agreement.

68. Bermuda and BVI have a "standing entrustment" which allows them to negotiate agreements in specified areas. Bermuda, Gibraltar and the Caribbean Overseas Territories have standing entrustments to negotiate tax information exchange agreements. The principles behind "standing entrustments" are the same as those for the much more common treaty-specific entrustments. Where a standing entrustment exists the Territories must keep the UK Government informed of negotiations in individual agreements and the UK has the right to refuse to allow an Overseas Territory to sign an agreement to which the UK objects.

HUMAN RIGHTS IN THE OVERSEAS TERRITORIES

69. Although the promotion of human rights in the Overseas Territories is principally a matter of domestic policy, and "local ownership", it also falls within the Governor's overall responsibility for promoting good governance. Furthermore, the UK Government has responsibility for ensuring that the Overseas Territories fulfil their obligations arising from international human rights Conventions which have been extended to them (see table at Annex C).[91] If the Overseas Territories are not fulfilling their obligations under these conventions, it is the UK, as the State Party, which will ultimately be found to be in breach of them. It is an FCO objective to extend all the key human rights Conventions to all the populated territories. A few core international human rights conventions have still to be extended to some of the Overseas Territories.

70. The establishment and maintenance of high standards of observance of human rights is a key 1999 White Paper objective. The aim is that the Territories should abide by the same basic standards of human rights, openness and good government that people in the United Kingdom expect of their Government. Where a Territory has accepted the right of individual petition under the European Convention on Human Rights, people in the Territory are able to bring a case to Strasbourg, having exhausted their domestic remedies where they think that their rights are being violated.

71. Different cultural traditions in the Territories have led to conflict with London in the past. For example, the refusal by the Caribbean Territories to decriminalise homosexual acts between consenting adults in private, contrary to the European Convention on Human Rights, forced the UK to legislate by Order in Council in December 2000. The death penalty for murder was abolished by Order in Council in the Caribbean Territories in 1991, also because the Territories refused to legislate themselves.

72. Governors, where necessary, remind Overseas Territory Governments of the need to address any areas of human rights where deficiencies have been identified. Human rights have been on the agenda for discussion at recent Overseas Territories Consultative Councils. The FCO and DFID are working together in particular areas of concern, including protection of children, to improve the situation where problems occur. DFID will run a Human Rights programme in the Overseas Territories over a 3-4 year period beginning in 2007/8. It will have a budget of about £1 million.

73. It is UK Government's policy to encourage the inclusion in the Constitution of the Territory of comprehensive fundamental (human) rights provisions. The FCO has provided a model human rights chapter to assist all the Territories with this for the purpose of their constitutional reviews. The British Virgin Islands have for the first time a fundamental rights chapter in their Constitution, which means individuals now have the possibility to bring a case to the local courts if they think that their human rights are being violated.

74. The Cayman Islands has set up a human rights Commission which is very active and has encouraged the Government to take human rights issues seriously, for example they are considering the human rights implications of the removal of prisoners, deportations, mandatory life sentences etc. The Turks & Caicos Islands is setting up a human rights commission to hear issues from the public, and it will consider the implementation of the various human rights Conventions.

75. Under the core UN human rights Conventions, State Parties are required to submit periodic reports to the UN review bodies which monitor compliance with these Conventions. These reports cover the Territories to which the instruments apply and the UK.

RELATIONS BETWEEN THE OVERSEAS TERRITORIES AND THE UNITED KINGDOM PARLIAMENT

76. The 1999 Overseas Territories White Paper considered the Territories' constitutional relationship with the UK. The White Paper detailed a new, modern relationship between Britain and the Overseas Territories based on four fundamental principles: self determination; mutual obligations and responsibilities; freedom for the Territories to run their own affairs to the greatest degree possible; and a firm commitment from the UK to help the territories develop economically and assist them in emergencies. Some UK Overseas Territories would like greater UK Parliamentary interest in, and support for, the Overseas Territories. But they want to retain their own Constitutions and decision-making powers. The interests of Overseas Territories' voters are quite different to those of British voters, and are more appropriately served by their own territory legislatures in accordance with their respective constitutions.

77. The Wakeham Commission (on Lords Reform) looked at the question of giving peerages to two or three people who would represent the interests of the Overseas Territories. The Commission did this partly at the behest of the Government, who were responding to a recommendation from the HoC FAC that Gibraltar should be represented in the reformed second chamber. Wakeham concluded "We see no case at present for any of the Overseas Territories to be formally represented or given a voice in the second chamber." They did then go on to say that individuals from the Territories might be offered membership on a personal basis "in the light of the closer ties that may develop". But such membership would be on the basis of the contribution they might make to the House of Lords, not because they would be asked to represent a geographical area.

78. The UK has already put in place processes to enable Territories to make their voices heard in Westminster. To improve links between the UK and the Territories, the White Paper led to the appointment, for the first time, of a Minister with specific responsibility for the Overseas Territories. It also set up the Overseas Territories Consultative Council, which meets annually, and provides a forum for structured political discussion between Overseas Territory governments and the UK government.

79. The All Party Parliamentary Groups for the Overseas Territories and the Commonwealth Parliamentary Association also provide mechanisms for direct contact between Members of Parliament and elected members of the legislatures of the Overseas Territories. The CPA meetings occasionally take place in the Overseas Territories themselves.

80. Anguilla, British Virgin Islands, Cayman Islands, Falklands, Gibraltar, Montserrat, St Helena and Turks & Caicos Islands maintain offices or representatives in the UK, one of whose functions is to develop links to Members of Parliament. A number of these Overseas Territories have helped to organise formal Committees of MPs to take an interest in their affairs.

Annex A

THE SOVEREIGN BASE AREAS OF AKROTIRI AND DHEKELIA

Location

1. The Sovereign Base Areas (SBAs) of Akrotiri and Dhekelia have an area of 98 square miles (3%) within the Island of Cyprus. The remainder of the island is the territory of the Republic of Cyprus (RoC) although since the Turkish intervention in 1974, the northern part of the island has been controlled by the Turkish Cypriots and Turkey. Cyprus is divided by a UN Patrolled Buffer Zone known as the Green Line. The Western Sovereign Base Area (WSBA), which includes the garrison of Episkopi and RAF Akrotiri, is geographically separate from the Eastern Sovereign Base Area (ESBA), which includes the garrison of Dhekelia. The northern boundary of the ESBA also forms a boundary with the north and is effectively an external boundary of the EU, which the Sovereign Base Area Administration (SBAA) must protect.

History

2. The SBAs comprise those parts of the former British colony of Cyprus retained by the United Kingdom on creation of the independent Republic of Cyprus. The Island as a whole had formerly been under British Administration since 1878 and a British Crown Colony since 1925. The SBAs were retained solely for military purposes.

3. Cyprus acceded to the European Union in 2004; attempts to unite the island prior to EU accession had not been successful therefore Cyprus entered the EU as a divided Island with the EU acquis suspended in the north. UK Ministers decided that upon Cyprus's accession to the EU, the SBAs should remain outside the EU.

STATUS

4. SBAs have the status of a British Overseas Territory, Her Majesty's sovereignty and jurisdiction over the Areas having been retained under section 2 Cyprus Act 1960.

CONSTITUTIONAL ASPECTS OF THE SBA

5. The Sovereign Base Areas of Akrotiri and Dhekelia Order in Council 1960[92] (made under section 2 Cyprus Act 1960), as amended by The Sovereign Base Areas of Akrotiri and Dhekelia (Amendment) Order in Council 1966[93] provides for the office of Administrator who is empowered to make laws for the peace, order and good government of the Areas, together with powers, in Her Majesty's name, and on Her behalf, to constitute offices for the SBAs. The Administrator is required to discharge his functions in accordance with such Instructions as may from time to time be given to him by Her Majesty through the Secretary of State for Defence. Such Instructions were issued as The Sovereign Base Areas of Akrotiri and Dhekelia Royal Instructions 1960,[94] which provided rules for the enactment of laws, and the creation of the Administrator's Advisory Board.

RELATIONSHIP WITH THE UK

6. The Administrator, as the head of the SBAA and as Her Majesty's representative, enjoys the legislative and executive powers broadly equivalent to those exercisable by a Governor. As the SBAs are retained for military purposes the Administrator reports to, and receives instructions from, Her Majesty through the Secretary of State for Defence. The Foreign and Commonwealth Office, with its responsibility for bilateral relations with the Government of Cyprus, works very closely with the MOD on issues likely to have an impact on those relations.

GOVERNANCE

7. The UK Government made a declaration regarding the administration of the SBAs in an Exchange of Notes at the time of the creation of the SBA and the RoC (commonly known as "Appendix O"). Although not legally binding the declaration sets out the main policy and objectives of the UK government in the administration of the SBAs. The SBAA continues to be guided by this declaration.

8. The SBAs are administered in a manner that requires maximum co-operation with the authorities and people of the RoC. The guiding principle is that the administration of the SBAs should follow as far as possible the laws, practices, procedures and style of government of the RoC without conceding sovereignty so that Cypriots living within the SBAs are not disadvantaged in comparison with their compatriots in the RoC. The Administration exercises only those functions of State which are necessary for maintaining Sovereignty—such as legislation and the maintenance of the judiciary, police and customs. Other functions are routinely delegated to, and performed by, officials of the RoC for example in areas such as agriculture, social services, education and the administration of antiquities. Over 10,000 RoC citizens live within the SBAs.

9. The Administrator is required by the Secretary of State for Defence to seek advice from the Administrator's Advisory Board on major policy or legal matters, particularly those affecting the RoC. The composition of this board is set in accordance with standing instructions from the Secretary of State for Defence. The board also meets in an augmented mode to serve as the Police Authority for the SBAs. Her Majesty's Inspectorate of Constabulary (HMIC) attend this Board. The SBA Police are inspected on a regular basis by HMIC to give assurance to the Administrator on the role, structure and effectiveness of the SBA Police.

10. A Protocol governing the obligations of the UK to apply certain provisions of EU law to the Areas was attached to the RoC Treaty of Accession. These provisions relate to customs, aspects of common commercial policy, taxation, agriculture and fisheries. The UK also gave undertakings about the handling of social security and external border controls. The Protocol is supported by a Memorandum of Understanding with the RoC on the responsibility for implementing the Protocol.

ROLE OF THE ADMINISTRATOR AND OTHER OFFICE HOLDERS

11. The Administrator is responsible for the good administration and government of the SBAs. The 1960 Order in Council stipulates that the Administrator shall be a serving officer of Her Majesty's Forces. The appointment is held by the Officer Commanding British Forces Cyprus, (BFC). The common principal objective of the Administrator of the SBAs and Commander BFC is "to maintain a stable environment in the SBAs in order to allow the strategic assets and Forward Mounting Base to operate unimpeded".

12. The SBAA provides civil administration in the SBAs covering similar interests to any civil government, but many of its functions, particularly for the 10,000 plus Cypriot inhabitants of the SBA, are carried out by Republican officials, on behalf of the Administration, under delegated powers.

13. The Administrator delegates day to day responsibility for the Administration to the Chief Officer of the SBAs, who is a Ministry of Defence Senior Civil Servant. The Administration is supported by the Attorney General and Legal Advisor, a legally qualified member of the Senior Civil Service, the Chief Constable of the SBA Police and the Fiscal Officer.

TRANSPARENCY OF GOVERNMENT AND ACCOUNTABILITY

14. The essentially military nature of the SBA is illustrated by the absence of a directly elected legislature and the vesting in the office of Administrator of all legislative and executive functions. There are no committees to undertake formal scrutiny of legislative or executive functions by the Administrator. The Administrator and other office holders within the SBA play an important role in ensuring that appropriate checks and balances are maintained.

15. The Administrator is empowered to "make laws for the peace, order and good government of the SBAs"[95] and is mindful of the declaration made under Appendix O that the laws applicable to the Cypriot population of the SBAs will be as far as possible the same as the laws of the RoC. It applies to legislation which the RoC has enacted, including those arising from membership of the EU and as a result of being signatory to the European Convention on Human Rights.

16. The Administrator is required by the Secretary of State for Defence to forward draft Ordinances of any major character, particularly those with political implications to the Ministry of Defence prior to issue (and to the British High Commissioner in the RoC).

17. All Ordinances and Public Instruments enacted by the Administrator are published in the SBA Gazette, which is copied to the Ministry of Defence so as to provide an opportunity for the power of disallowance to be exercised.

18. SBA Ordinances and Public Instruments enacted since 2004 are publicly available on the SBA website at www.sbaa.mod.uk. and arrangements are in hand for legislation which pre-dates 2004 (hitherto only available in deteriorating hard copy form) to become available via the Internet.

19. The SBA has its own legal system, including a two-tier court system (with limited rights of appeal to the Judicial Committee of the Privy Council). The actions of the Administration are amenable to challenge through the courts.

20. The Human Rights Ordinance 2004 which was brought into force on 1st May 2005, makes it unlawful for a public authority (including therefore the SBA Administration) to act in a way which is incompatible with a Convention right. It also requires that, so far as possible, legislation of the SBAs must be read and given effect in a way, which is compatible with the Convention rights. It enables any individual who claims that their rights under the Convention have been violated to bring proceedings in the SBA Court and to seek redress.

21. The remedy of judicial review is available to those aggrieved by the actions of the Administration, broadly in accordance with the principles applied in relation to judicial review in England and Wales.

ACTIVITIES OF POTENTIAL POLITICAL SENSITIVITY

22. The Administrator is required by the Secretary of State for Defence to consult with him before undertaking any activity that would deviate from the basic principles in the declaration made under Appendix O.

POPULATION

23. The population of the SBAs includes approximately 7,800 Service personnel, civil servants and dependants living mainly in the Garrison and Station areas and over 10,000 Cypriots. The Cypriots living in the Areas are recognised residents of the SBAs but are EU and RoC citizens. They vote in the respective RoC and EU elections. There are a number of communities that extend into both the SBAs and the RoC; Cypriots who reside in the SBA part of the community are treated in accordance with the Communities Law of the RoC.

EXTERNAL RELATIONS

24. As military bases, the SBAs do not have external relations in the normal sense, but formal discussion with the Government of Cyprus over the SBAs is conducted as bilateral business between the UK and Cyprus, through the British High Commission in Nicosia and the Cypriot Ministry of Foreign Affairs. Day-to-day matters are dealt with directly between the Cypriot and SBA authorities.

ECONOMIC ASPECTS OF THE SBA

25. The SBAs use the currency and financial control mechanisms of the RoC and will use the Euro as local currency when Cyprus adopts the Euro on 1st Jan 2008.

26. Although legally a separate Government entity, the SBAA is funded by the Ministry of Defence. The Annual Operating Budget is approximately £11.5M. The SBAA generate revenue of approximately £300K. In addition to this the SBAA collect monies on behalf of the RoC, which are returned every quarter. It would be impossible to give an accurate figure of the monies returned to the RoC as this comprises of the income tax on earnings of dependants and Sutlers[96] and taxes and imports paid by Cypriots living and working in the Areas.

REGULATION OF THE FINANCIAL SECTOR

27. The SBAs use the currency and financial control mechanisms of the RoC. Appendix O delegates a number of administrative functions to the RoC. Regulation of the Financial sector falls into this category.

SOVEREIGNTY DISPUTES

28. The Government of the RoC acknowledges the UK's sovereignty over the SBAs, although it believes that the UK's sovereignty is "limited" because the Areas were retained solely for military purposes. The UK position is that the SBAs have all the attributes of fully sovereign territory. This difference of opinion does not prevent good day-to-day co-operation with the RoC over the operation of the SBAs.

ENVIRONMENT

29. The SBAs are environmentally rich. The SBAA strives to manage the environment in accordance with international environmental conventions. The following have been extended to the SBAs:

— Bern Convention on the Conservation of European Wildlife and Natural Habitats,

— Ramsar Convention on Wetlands of International Importance,

— Bonn Convention on the Conservation of Migratory Species of Wild Animals,

— Paris Convention of UNESCO on the Protection of the World Cultural and Natural Heritage, and

— London Convention on the Prevention of Marine Pollution by Dumping of Wastes and other Matter.

30. Though not formally subject to EU environmental directives, the SBAA also manages the environment in accordance with the precepts following EU Directives:

HUMAN RIGHTS

31. With effect from 1st May 2004 the Government of the United Kingdom declared the extension of the European Convention on Human Rights to the SBAs. It further declared that it accepted the competence of the European Court of Human Rights to receive petitions from individuals as set out in Article 34 to the Convention. The Convention was given further domestic effect in the SBAs through the enactment of the Human Rights Ordinance 2004. This law was brought into force on 1st May 2005.

32. The main body of the ECHR was extended in its entirety. The First Protocol was not extended to the SBAs because it includes an undertaking to hold free elections. The Administrator of the SBAs is appointed by the Secretary of State for Defence, there are no elections for the post of Administrator of the SBAs and nor can there be. It would only have been possible to extend the First Protocol if it were permitted to make a reservation in respect of Article 3. Article 57(1) of the convention states that reservations of a general character shall not be permitted. The Protection of Property Ordinance 2004 and the Right to Education Ordinance 2005 were enacted in order to provide domestic equivalents to the Convention rights set out in Articles 1 and 2 to the First Protocol.

33. The UK has not acceded to Protocols Four, Seven or Twelve so these Protocols cannot be extended to the SBAs.

15 October 2007

Annex B

Constitutional Review Developments

ANGUILLA

A Constitutional and Electoral Reform Committee was appointed in 2002, but failed to complete its work. A new Constitutional and Electoral Reform Commission was established in 2005 under the chairmanship of retired judge Mr Don Mitchell CBE QC, and it published a comprehensive report in August 2006. The report has since been under consideration by members of the Anguilla House of Assembly and by the public in Anguilla. A first round of discussion with the FCO was due to take place in July 2007, but this was postponed at the request of the Chief Minister of Anguilla to allow for further public consultation.

BERMUDA

No constitutional review commission has been appointed in Bermuda. But at the request of the Government of Bermuda a cross-party Constituency Boundaries Commission was established in 2001 to make recommendations on the number and boundaries of single-member constituencies to replace the previous system of dual-member constituencies. Following the Commission's report, the Constitution of Bermuda was amended in 2003 to provide for 40 single member constituencies for elections to the Bermuda House of Assembly.

BRITISH INDIAN OCEAN TERRITORY

In 2004 a new Constitution was provided by the British Indian Ocean Territory (Constitution) Order 2004. The reasons for this were explained to the House of Commons by Mr Bill Rammell MP, then FCO Minister of State, as follows (Hansard 15 June 2004 Columns 33WS and 34WS):

" . . . anything other than short-term resettlement on a purely subsistence basis would be highly precarious and would involve expensive underwriting by the UK Government for an open-ended period—probably permanently. Accordingly, the Government consider that there would be no purpose in commissioning any further study into the feasibility of resettlement; and that it would be impossible for the Government to promote or even permit resettlement to take place. After long and careful consideration, we have therefore decided to legislate to prevent it.

"Equally, restoration of full immigration control over the entire territory is necessary to ensure and maintain the availability and effective use of the territory for defence purposes, for which it was in fact constituted and set aside in accordance with the UK's treaty obligations entered into almost 40 years ago. Especially in the light of recent developments in the international security climate since the November 2000 judgement, this is a factor to which due weight has had to be given.

"It was for these reasons that on 10 June 2004 Her Majesty made two Orders in Council, the combined effect of which is to restore full immigration control over all the islands of the British Indian Ocean Territory. These controls extend to all persons, including members of the Chagossian community.

"The first of these two orders replaces the existing constitution of the territory and makes clear, as a principle of the constitution, that no person has the right of abode in the territory or has unrestricted access to any part of it. The second order replaces the existing immigration ordinance of the territory and contains the detailed provisions giving effect to that principle and setting out the necessary immigration controls . . . "

The validity of certain provisions of this Order has been successfully challenged in the English courts. The Government is currently awaiting the result of its application to the House of Lords seeking leave to appeal.

BRITISH VIRGIN ISLANDS (BVI)

A local Constitutional Reform Commission (CRC), chaired by Mr Gerry Farara QC, presented a comprehensive report in April 2005 after wide public consultation.

Three rounds of negotiations were held between FCO and BVI delegations from March 2006, taking as its basis for work the 116 recommendations of the CRC. In February 2007 the fourth round of talks was successfully concluded in London, under the chairmanship of Lord Triesman. A new Constitution was agreed in draft, and after further public consultation it was debated and approved by the BVI Legislative Council.

The draft Constitution was sent to the Foreign Affairs Committee on 28 April 2007.

The new Constitution came into force on 15 June 2007.

CAYMAN ISLANDS

A local Constitutional Review Commission, chaired by Mr Benson Ebanks OBE JP, reported in March 2002, including a draft new Constitution. Principles for a new Constitution were agreed at talks in December 2002 between FCO and Cayman Islands representatives. In February 2003 a draft Constitution based on this agreement was sent to the Cayman Islands and published there. The draft Constitution includes a chapter on human rights, agreed with the Caymanian representatives. One of the changes proposed at the Caymanians' request was to move from multi-member constituencies electing 15 members to 17 single member constituencies. An Electoral Boundary Commission was established by Order in Council and reported in September 2003.

In late 2003, the then CIG proposed a series of changes to the position it had agreed at the December 2002 discussions. Talks were due to take place in February 2004 to try to resolve the new issues raised by the CIG, including their decision to propose postponing to 2008 the move to single-member constituencies in all the multi-member electoral districts except George Town. But the CIG cancelled the talks saying it had more important issues to deal with in the run up to the November 2004 general election. Following Hurricane Ivan, the general election was postponed until May 2005, at which there was a change of government. Informal talks were held between the new CIG and the FCO in March 2006 with a view to restarting the constitutional review process. The CIG is still reviewing its position and preparing for further local public consultation.

FALKLAND ISLANDS

After wide public consultation, a Select Committee of the Falkland Islands Legislative Council published a report in May 2007 making a number of recommendations for constitutional change.

GIBRALTAR

A Select Committee of the Gibraltar House of Assembly published a report, which included a draft new Constitution, in January 2002. Following three rounds of discussion between Gibraltar and FCO delegations, a new Constitution was agreed in draft in March 2006. The draft new Constitution was then published in Gibraltar, and was approved by a referendum in Gibraltar in November 2006.

The draft Constitution was sent to the Foreign Affairs Committee on 30 October 2006.

The new Constitution came into force on 2 January 2007.

MONTSERRAT

Montserrat's Constitutional Review Commission, under the chairmanship of the former Speaker, Professor Sir Howard Fergus, produced its report in March 2003 after widespread consultation in Montserrat and amongst the Montserratian community overseas.

After informal talks with FCO officials in October 2003, the first round of formal negotiations eventually took place in September 2005, following which a first draft of a new Constitution was prepared and formed the basis of work for the second round in March 2006. After Legislative Council elections in the summer of 2006 a third round was held in October 2006 with the new team of Councillors, followed by a fourth round in May 2007. A large measure of agreement has been reached, but some difficult issues remain to be resolved.

ST HELENA, ASCENSION AND TRISTAN DA CUNHA

In early 2003, advised by Mrs Alison Quentin-Baxter QSO, a New Zealand barrister and constitutional adviser funded by the Commonwealth Secretariat, the elected Legislative Councillors of St Helena made proposals for a new Constitution that would introduce a ministerial system of government in St Helena. These proposals were discussed with the FCO in April 2003, and the principles for a new Constitution were in due course agreed. Consultations were also held with the Island Council on Ascension. A new Constitution was drafted and was published in St Helena, with a view to wide public consultation. In May 2005 a consultative poll was held in St Helena in which voters were asked whether they approved the introduction of ministerial government. The result of the poll was negative. The draft Constitution has therefore not been proceeded with. Consideration is being given to the desirability of constitutional changes that would not involve ministerial government.

TURKS AND CAICOS ISLANDS (TCI)

A local Constitutional Review Body, chaired by Mr Daniel Malcolm, presented its report in September 2002.

Three rounds of negotiations were held between FCO and TCI delegations in June and December 2004 and October 2005. Agreement was reached at the final round on the principles for a new Constitution, which was then drafted and published in the Islands. Following further public consultation in the Islands the Legislative Council then debated and approved the new Constitution.

The draft Constitution was sent to the Foreign Affairs Committee on 5 June 2006.

The new Constitution came into force on 9 August 2006.

ANNEX C