Crown Dependencies - Justice Committee Contents

Examination of Witnesses (Question Numbers 1-19)


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 clients—I am a partner in the firm of White & Case—but 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 becomes necessary.

  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 Report—all those reports, by the way, are this year, but they date back to the Edwards Report in 1998—and, 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 hearing—I think it was in the other place, as you say—it 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 responsibility—I do not know about the legal responsibility—of 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, no—no officially that is—because 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 here—it is a slightly different process for the Isle of Man—that 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 transparent then.

  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 products—early season potatoes and spring flowers—and 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 them—intellectually for me, practically for them—is 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 that—I 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 situation—for 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 Islands.

  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 treaties.

  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 Office—of 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 offices.

  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 autonomous—that is, they are responsible for writing their own laws and hanging those laws into the framework of their own constitutions—they 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.

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