Examination of Witnesses (Question Numbers
15 DECEMBER 2009
Q1 Chairman: Professor Sutton, welcome.
You have an impressive list of university chairs dotted about
the world, but we have got you in front of us today because we
think you can help us with some of the background to the inquiry
we are just beginning on the Crown Dependencies, though I understand
that you have an interest which you want to declare before we
invite you to give evidence.
Professor Sutton: Yes, indeed.
First of all, thank you for inviting me today. It is a subject
which I find interesting politically, legally and institutionally,
and it gets more interesting, I think, by the day with international
developments. I was with the European Commission for 20 years.
When I left to practise law, one of my first clients was the States
of Jersey, and they were followed later by the States of Guernsey
and the Isle of Man. I should make it quite clear, these are not
my only clientsI am a partner in the firm of White &
Casebut they are a significant part of my work. If I may
continue for one minute on that theme, I would say that I think
the reason why I was asked to help them back in 1989 had to do
with my previous job, which was as a Member of Cabinet for Lord
Cockfield when he came to Brussels in 1985 when Jacques Delors
launched the single market, quite successfully really. It led
to their seeking advice in Brussels. That was the point.
Q2 Chairman: Do we understand that
you still have a contractual relationship, because the islands
are your clients in respect of their European interests?
Professor Sutton: I do not have
a contractual relationship with them. They are clients of White
& Case and I am the partner in White & Case responsible
for their work in Brussels.
Q3 Chairman: Thank you. The Ministry
of Justice has said, and indeed Jack Straw has said as much in
evidence directly to us, that the Crown has ultimate responsibility
for "good government" of the Crown Dependencies. Do
you know what the legal basis is for this responsibility and what
does it mean?
Professor Sutton: The legal basis
must reside in UK constitutional law. Unlike many Member States
of the EU, our constitution is not wholly written. Many of our
constitutional concepts are judge-made, many of them, I think,
reside in practice, convention. The borderline between convention
and constitutional law is sometimes difficult to draw. Sometimes,
I think, judicial clarification is needed to establish where the
dividing line comes between convention and law and I think the
concept of good government, or good governance, is one such concept;
it is an abstract concept. If you were to ask me, "Be more
specific, Professor Sutton, and tell me what you think it means",
I think it probably means, not merely effective, efficient government,
or governance, as that term is very often used these days at all
levels, but in the case of the Crown Dependencies what it has
come to mean is that the intervention by the United Kingdom should
only be where good governance ceases to exist, and that would
be where there is really a breakdown in the system of law and
order, or civil governance, to the point where outside intervention
Q4 Chairman: There would have to
be rioting in the streets, do you think, before good governance
would be activated?
Professor Sutton: When I have
thought about this concept I have come to it, in a sense, from
the other end, because I think anything more unlikely than rioting
in the streets is hard to imagine in Jersey, Guernsey and the
Isle of Man. I am not going to make comparisons with other jurisdictions,
but it is absolutely clear that the Crown Dependencies over the
last ten years or more have been subjected to independent objective
external scrutiny, amongst others, by the OECD, by the IMF and,
more recently, in the Foot Reportall those reports, by
the way, are this year, but they date back to the Edwards Report
in 1998and, consistently, they have been found to be well
governed in the sense that they are well regulated (that is up
to international norms in terms of financial regulation), they
are transparent (in the sense that their procedures, their practices
are open to international scrutiny) and they are co-operative
(in the sense that they co-operate with other jurisdictions for
exchange of information).
Q5 Chairman: But that is not really
the point, is it? Whether or not they are well governed is not
the question we are looking at. It is what would constitute an
absence of good governance or a failing in good governance that
would appear to trigger what the Secretary of State thinks he
has a power to do?
Professor Sutton: I think in one
previous hearingI think it was in the other place, as you
sayit was mentioned that this was a hypothetical and wholly
unrealistic prospect. I think that is a comment with which I would
agree. If you ask me to imagine a situation other than rioting
the streets, as you put it, you could imagine in this day and
age a collapse of the economy such that the moral responsibilityI
do not know about the legal responsibilityof the UK to
intervene to bail out one of the Crown Dependencies could arise.
Say the economic governance of one of the islands was such that
it was irresponsible, it was reckless, it was unduly risky and
led to a collapse of the economy. Of course, that has not been
the case. That is not the case, I think, in any of the Crown Dependencies.
They are, in a sense, almost paragons of virtue in terms of economic
management. They do not receive outside subsidies, they finance
their own education, their health, their schools, their transport
systems, and so on, and even in this crisis they have managed
to balance the budget very well and emerged quite strongly from
the crisis. So I think that hypothesis has to be put to one side
for the moment as well. More than that, you asked me a legal question
to begin with, and my view is that under constitutional law the
concept of good governance has never been judicially defined.
The circumstances under which their autonomy would be limited
by UK intervention has never been defined, therefore it does remain
hypothetical, and that is as far as I would be prepared to go.
Q6 Alun Michael: Can I approach it
from a slightly different point of view? I think you have described
almost the principles of subsidiarity in terms of only interfering
when it is necessary to interfere, but what mechanisms are there
in place for the UK Government to identify if there is an issue
where governance in a Crown Dependency is not good enough?
Professor Sutton: I think one
of the words which has come to my mind whilst preparing for today
is "co-operation", and we can perhaps come back to this.
I think the status of the Crown Dependencies is unusual, if not
unique, in international relations and in constitutional relations
as well and there is a problem, there is a tension between, on
the one side, the constitutional autonomy or self-governance of
the islands and, on the other side, the responsibility of the
United Kingdom under public international law for the international
relations of those islands, and that presents a tension.
Q7 Alun Michael: I understand that,
but that is to look at it again in legal terms. I was trying to
move away from the legal terms. For instance, there is a responsibility
of the UK Government when it comes to institutions within the
UK on the mainland. The relationship with local government, central
government, can interfere at any point, but it is a rather different
point to a responsibility to interfere on how Government satisfies
itself on the quality of governance at a local authority level.
It is more in that sort of way. Unlike the situation in Cardiff,
for instance, or Southampton, or whatever, there are Members of
Parliament who may raise issues with ministers, and so on, so
there are mechanisms, but how does any issue get drawn to the
attention of the UK Government? How does the UK Government satisfy
itself that there is not an issue of governance on which it ought
to put its nose in?
Professor Sutton: I do not want
to give you another legal reply, but in a sense one answer to
your question would be that this is not a devolved situation.
This not Scotland, Wales, or Northern Ireland, this is not a local
council. The problem, or the issue, or the fact, or the legal
situation is that they are autonomous and self-governing. Under
UK constitutional law and practice, it is only when it comes to
international affairs or defence that the UK can, as it were,
intervene. Let us leave aside for a moment good governance.
Q8 Alun Michael: Hang on a minute,
because I am only interested in the good governance one at moment.
What I am concerned with is not the legal position, because I
respect the situation that you have described, it is how does
the UK Government know whether or not the governance is good enough?
I accept what you say that 99 times out of 100 there is not going
to be a problem, but how would they know if there was a problem?
Professor Sutton: The mechanism
for co-operation between the United Kingdom and the three Crown
Dependencies is through the Ministry of Justice. If you were asking
that question about a third country, I would say we must ask the
Foreign Office and they must ask their mission in the country
in question. But you are not, you are asking about a British Crown
Dependency, and the situation is anomalous in the sense that there
is no official means for the UK to inform itself. However, there
are channels of communication, clearly, which are used every day
for the every day running of these islands in co-operation with
the UK, as the three Crown Dependencies have made clear in their
three submissions to you.
Q9 Alun Michael: Yes, but when issues
have arisen, for instance there were issues with the Isle of Man
over the problems with Kaupthing Bank which we looked at a few
months ago, one of the questions we had to ask was how is the
Department for Justice and the ministers in that Department following
through their responsibility to the Crown Dependency? It is a
similar sort of question here. Is anybody looking at the issues
of governance? Is there a mechanism whereby the citizens of one
of the Crown Dependencies could, for instance, raise with the
UK Government: "Look there is a failure of governance here,
somebody ought to do something about it"?
Professor Sutton: I think the
answer to your question is probably, nono officially that
isbecause of the situation which has existed historically
for such a long time. If I may continue to develop that thought
at the moment, of course, I was going to say that when there is
an international overspill, or threat of it
Q10 Chairman: Shall we leave the
international situation to one side for the moment, because we
will come back to it.
Professor Sutton: Yes. I was going
to ask, Chairman, whether it is possible to leave the international
dimension to one side. The point I was going to make to Alun Michael
was this. In the modern world that is precisely the problem, I
think, with these kind of issues, that the areas for which their
self-governance and autonomy has existed over decades, if not
centuries, has today become inextricably linked with international
affairs. Take taxation: there is nothing closer to national sovereignty
than taxation here in this country and so it is in Jersey, Guernsey
and the Isle of Man, yet tax has become a matter of international
concern. In my lifetime, since I was teaching at University College
35 years ago, the area of domestic concern under international
law was immense. Today it is very, very narrow. Almost any issue
which arises in any jurisdiction has a potential overspill: elections
in Sark; the Human Rights Convention. Does it apply? Yes, it does.
Have they respected their obligations? That is a matter of concern
to the UK because the UK is responsible for the international
relations of Guernsey and Sark.
Alun Michael: So how does the
UK Government, how does the Department for Justice, satisfy itself
in that regard?
Q11 Chairman: There is one mechanism
you have not mentioned actually which relates to legislation.
If legislation is proposed in any of the territories, then the
Ministry of Justice is informed of the legislation and before
Royal Assent is given advice is taken from relevant UK departments
as to whether there are any issues in this legislation, and not
all of the issues I am aware of that have been brought to bear
in considering Royal Assent have been international in character.
Professor Sutton: With respect,
when that question was raised just now, when I talked about the
daily co-operation between the Ministry of Justice and the islands,
I meant in respect of legislation and issues which, whilst not
perhaps subject to legislation at the moment, might become so.
I think the Ministry of Justice made that clear in their testimony
here as well. As we speak, so to speak, there are contacts going
on between all three jurisdictions quite separately and Patrick
Bourke and Rose Ashley within the Ministry of Justice. Of course,
focusing on legislation which has to pass through the Royal Assent
process hereit is a slightly different process for the
Isle of Manthat involves issues which arise sometimes with
great publicity in, say, Jersey or Guernsey and the Isle of Man.
There is a channel of communication. I do not think it is defined,
I do not think it is formal, but there is clearly a mechanism
whereby the Minister of Justice can pick up the phone, call the
Chief Executive of Jersey, Guernsey or the Isle of Man and say,
"Could we discuss this? What is going on? How is that working.
Let us talk about it."
Q12 Alun Michael: So it is not terribly
Professor Sutton: No, I do not
think it is transparent, but may I just say, in historical perspective,
if you look back 30 years or 35 years, the islands' relationship
with the EEC at the time was limited to free trade and horticultural
productsearly season potatoes and spring flowersand
the world has slightly changed. It has changed very quickly actually.
In my view, the relationship between the Crown Dependencies and
Europe and the world and the UK has changed with increasing rapidity
and intensity over the last ten years. If you go back to 2004,
that was a watershed in their relations with Europe because of
the Tax on Savings Directive, the tax package, the code of conduct,
and so on. That was when they first, I think, realised that they
had to stand up and be counted in Europe because the European
Union turned to the islands and said, "We want to have agreements
with you." Their first reaction was to resist. The UK then,
I think, exercised a degree of pressure on them to negotiate with
the EU. Since then they have been actually leading the way in
the conclusion of tax agreements with the European Union. There
is no doubt that the last six years have seen quite an amazing
change in their economic situation and their relations with the
world as a result of that, and that is going to continue, I think.
One of the pieces of advice which I am giving at the moment to
the islands is that they must constructively engage with Europe.
Why is that? It is because their economies depend on financial
services to a very large extent and, in terms of financial services,
they need market access in Europe. To have market access, as you
know from the measures currently in the pipeline, they are going
to need to be recognised by Europe as having equivalent standards
of regulation and supervision. The question for me and for themintellectually
for me, practically for themis how do they meet that challenge
under the current constitutional situation. It is not obvious.
Q13 Alun Michael: Can I ask one other
thing then, because quite a lot of it is, seemingly, not obvious.
I am sure you are reflecting reality. If the Department for Justice
identifies a lack of good government through the process of opaque
osmosis that you have described, what can it do about it? There
is a limit, is there not, because of the independence of those
dependencies, and yet there is a responsibility on the sort of
thing that you have just described for the UK to make sure that
those things happen. What can the Department for Justice do without
over-stepping the mark?
Professor Sutton: It can give
its views, it can advise, it can warn, but I think it cannot intervene
in an executive, judicial or legislative sense.
Q14 Julie Morgan: On the same theme,
I think it is quite difficult to get to grips with what can be
done. What if the Government fails to address governance problems
in the Crown Dependencies? What mechanism is there to address
that? Say something is going on that should be addressed and the
UK Government fails to do it, is there any consequence to that?
Professor Sutton: Obviously there
could be political consequences; obviously there could be economic
consequences; obviously there could be social consequences. I
do not want always to come back to the legal situation, but the
law is important, I think, and the legal situation which has been
put in place over a long time by the United Kingdom and endorsed
publicly by the United Kingdom Government repeatedly, leaves,
I was going to say ultimately, to a very great extent responsibility
for governance to the islands. It is not, for example, a question
of the UK Government substituting its view for the elected authorities
of Jersey or Guernsey or the Isle of Man in how the place should
be run any more than it would be in Scotland or Wales in matters
which are subject to devolved authority. In Scotland, Wales and
Northern Island we have statutes. We do not have a statute in
the case of the Channel Islands or the Isle of Man. Perhaps there
should be. Suggestions have been made that we would benefit from
having the relationship more clearly defined. The framework for
international identity is the first attempt that I am aware of
for a very long time to try to set down in writing some of those
concepts. I am not trying to avoid answering your question, it
is just that if we leave aside the extreme situation of a breakdown
in civil law, and so on, and we are dealing with issues falling
short of thatI have already mentioned the possibility of
economic collapse where the United Kingdom would obviously have
a major interest in intervening to try to resolve such a situationfor
the rest that is what the governments are elected in those places
to do, to run the place as best they can. It may not be satisfactory,
and I can see from the Chairman's face that it may not be satisfactory,
but it is the way it is, I think.
Q15 Chairman: I was just reflecting.
Have you considered the Turks and Caicos possibility where the
Government forms the view that the administration is corrupt and
has to take action for that reason? I am not making a comparison
as to what is happening in the two places, I am just saying that
in those circumstances the UK Government intervened for a different
reason from any that you have advanced in relation to the Channel
Professor Sutton: Absolutely.
I did not want to mention that specific case, obviously, but if
such a situation arose in one of the Crown Dependencies where,
on the basis of reasonable evidence and so on, there was evidence
of corruption and bad government in that sense, that would be
a new situation which would have to be considered. I think that
is absolutely clear.
Q16 Julie Morgan: To go on to the
international situation and international treaties, the UK is
responsible for seeing that the Crown Dependencies comply to those
Professor Sutton: Yes.
Q17 Julie Morgan: What sorts of mechanisms
are in place to monitor whether they are complying to international
treaties, for example?
Professor Sutton: The mechanisms,
I think, are for the most part international mechanisms. In other
words, the approval which has been given to Jersey, Guernsey and
the Isle of Man for their financial regulation, their co-operative
approach and their transparent legislation is international. That
is, the OECD, in April this year, put Jersey, Guernsey and the
Isle of Man on their white list, they put three Member States
of the EU on a grey list. So that was international approbation,
international recognition of conformity with internationally accepted
standards. That was mentioned also, of course, in the Foot Report.
The IMF has reviewed Jersey and the Isle of Man this year. They
are going to do Guernsey, I think, next year or in the future.
The same result has been given: conformity with international
standards. If you are asking what mechanisms are in place in this
country, then I think that is clearly in the hands of the Ministry
of Justice and the Foreign Officeof course, the Ministry
of Justice acting as a conduit or a channel between the islands
and the different ministries here. I am not aware, over 20 years,
of their compliance with international treaties that have been
extended to them by the UK being put in question. The issue is
rather the other way round. It is the extent to which the United
Kingdom has put in place mechanisms to assist the islands and
also to discharge its obligation, not to promote necessarily but
to protect and defend the interests of the islands internationally
because, as the Kilbrandon Report noted in, I think, 1972 or 1973,
this is a two-way street: their rights and obligations going both
ways. What I notice is that it is quite difficult for the United
Kingdom (and I am choosing my words carefully) to assist these
small jurisdictions with small administrations. They lack resources;
the UK lacks resources; we all lack resources in this crisis.
Nonetheless, these islands have no missions or delegations or
Chairman: We are going to come back to
the Brussels point. I am going to stop you there, because it is
a little later down our agenda this afternoon. I am going to turn
to Dr Whitehead, but I promise to return to it.
Q18 Dr Whitehead: A further possibly
brain squeezing aspect of constitutional arrangements. If we draw
a distinction between the question of good governance, as in a
government is not carrying out its own constitution very well,
as opposed to the idea that the constitution itself may lack what
might be regarded as the wherewithal for good government, and
then one looks at the issue of the fact that the three Crown Dependencies
are constitutionally autonomousthat is, they are responsible
for writing their own laws and hanging those laws into the framework
of their own constitutionsthey presumably, therefore, could,
subject to Royal Assent I believe, produce laws which would make
constitutional changes to their own system of government. Already
you have in Jersey and Guernsey, for example, the multiple role
of the bailiffs as arguably a very substantial lack of separation
of powers within their constitutional arrangements. How might
those considerations be considered in terms of good government,
which is how the relationship of the UK to Crown Dependencies
has been defined? If the constitutions of those dependencies were,
for example, changed to the extent that it might appear that good
government was thereby not possible, who would be competent to
make an assessment of those systems?
Professor Sutton: I think the
answer is that, in the first place, these three Crown Dependencies
do not have written constitutions any more than we do, so their
legislation is, you can call it, constitutional or ordinary statutory
legislation. It is legislation. All legislation has to be submitted
to the process under the Privy Council for Royal Assent through
Ministry of Justice. So there is a process there which very often,
I think, throws up difficulties and questions are raised either
by the Ministry of Justice or by other departments. In the case
which you specifically mention, I imagine it might be the Ministry
of Justice which would say, "Just a minute. If you make that
change, for example bringing together two functions where they
should be separated under a normal separation of powers regime,
there could be a problem here with the European Convention on
Human Rights, let us look at that again", and that could,
at the end of the day, delay Royal Assent until such time as it
was resolved to mutual satisfaction. I would say that if a constitutional
objection was raised to that by one of the Crown Dependencies
the answer in the United Kingdom would be to say no. As previous
experience has shown, this is a matter which is no longer domestic;
this is a matter which falls under the European Convention on
Human Rights, therefore we legitimately raise questions, or constitutionally
raise questions, over that. So that would be how that would be
dealt with, I think.
Q19 Dr Whitehead: Does that purely
relate to what might be the case, say, of human rights in Europe,
for example? Would there be circumstances, or could there be circumstances
under which it might be considered in the UK that, for example,
the lack of separation of powers within the role of the bailiffs
would not itself be regarded constitutionally as good governance
and, therefore, the UK, in a sense, almost operating as a sort
of Supreme Court, determining what is constitutional and what
is not, might be able to say, "We do not think constitutionally
that is good government, therefore you ought to amend your own
statutes to bring you into line with what we, the UK, think is
good government. For example in terms of a proper separation of
powers within the process of government"?
Professor Sutton: I think that
the United Kingdom could take such a position. I think that it
would inevitably have to base that view on an instrument like
the Convention on Human Rights, and, of course, at the end of
the day there would be the possibility for judicial review by
the Supreme Court, either as such or as the Privy Council, and
to take a binding view on that which would bind not only the United
Kingdom but also the Crown Dependencies because the Supreme Court
or the Privy Council is the ultimate Court of Appeal. So the answer
to your question is, yes, the UK position is clear. How far it
could go would depend on the specific issue, I think, but, clearly,
provided there is that right of judicial resolution of the matter,
there is no problem. That is where any gaps, in the absence of
a written constitution, can be closed, which is by the judiciary.