5 International relations|
In international law the United Kingdom Government
is responsible for the Islands' international relations.
The United Kingdom Government is also responsible for the defence
of the Islands.
Kilbrandon Report, para 1363
The constitutional position
74. The Ministry of Justice told us that the Crown
Dependencies are not sovereign states and, therefore, the UK Government
is responsible for representing them internationally and for their
defence. Although the Ministry of Justice is responsible for the
UK Government's relationship with the Crown Dependencies, the
responsibility for their international representation is shared
across the UK Government. The Ministry of Justice considers that
"the policy-holding department is best equipped to take forward
negotiations which the Ministry of Justice would have neither
the expertise nor access to the correct channels to carry out."
In cases where other departments are involved, the Ministry of
Justice provides a channel of communication between the Islands
and the relevant department and ensures that the latter understands
the constitutional position.
75. The Crown Dependencies are not part of the EU
or EEA. However, under Protocol 3 to the UK's Act of Accession
1972 they are in the Customs territory of the EU, so that they
can benefit from free movement of industrial and agricultural
goods, and they are subject to the duty to apply the same treatment
to all natural and legal persons of the Union. Protocol 3 has
not been affected by the Lisbon Treaty.
76. Professor Alastair Sutton, an expert in European
law who has worked with and advised the Crown Dependencies, considers
that, since Protocol 3 was introduced, the importance to the Crown
Dependencies of trade in goods has diminished, with financial
services being far more important in economic terms. He describes
four phases in Crown Dependency relations with Europe. First,
from the adoption of Protocol 3, although free movement of goods
was facilitated, there was little or no engagement on either side.
Second, the creation of the Single Market in the European Community
in 1985 did not have much impact on the Crown Dependencies, although
they did monitor the situation. Third, from 2000 to 2005, there
were significant developments in the taxation field, including
the tax on savings Directive and the Code of Conduct on harmful
business taxation. Although tax policy was outside Protocol 3,
the Council of Ministers decided that these measures would apply
to the Crown Dependencies, a view encouraged by the UK Government
according to Professor Sutton. Under pressure from the UK Treasury,
the Crown Dependencies negotiated bilateral agreements implementing
the Directive with all 27 EU Member States and modified their
corporate tax structure to conform to the Code of Conduct. Fourth,
since 2005, there has been a period of "constructive engagement"
between the Crown Dependencies and the EU, during which contacts
have increased, market access possibilities have been explored
and the Islands have continued to develop their "external
77. There is a particular issue for the Crown Dependencies
in relation to the EU in terms of both receiving important information
about EU activity which is likely to have an impact on them; and
in terms of increasing their profile with the EU and enhancing
their "external personality". It is, strictly speaking,
the role of the Ministry of Justice to feed back to the Crown
Dependencies information on international measures likely to affect
them. However, as noted in Chapter 4, this does not always happen
and, when it does, the information may come too late for anything
meaningful to be done to influence the outcome. During our discussions
with the Island governments, it was suggested that one solution
to this particular problem would be for the Crown Dependencies
to establish offices, either together or separately, in Brussels,
along the same lines as the Brussels offices of the devolved administrations
of the UK. The Crown Dependencies' offices would be in a position
to work closely with UKRep and benefit from proximity to the decision-making
heart of the EU in Brussels.
78. We support the desire of the Island governments
to set up representative offices in Brussels. We consider that
such a step would be valuable, both in terms of acquiring better
access to information about EU measures which might affect them
and in terms of raising their own international profiles.
79. The Islands' "external personality"
continues to develop in other areas. The Crown Dependencies, through
dealings with the OECD, IMF and others, have increasingly ensured
that their legislation on tax, corporate governance and economic
crime conforms to international standards. Through the negotiation
of Tax Information Exchange Agreements with third countries, they
have been placed on the OECD "white list" as Jurisdictions
which have substantially implemented the internationally agreed
tax standard. The
international standing and reputation of the Crown Dependencies
as financial centres were further reinforced by the findings of
the Foot Report: that they had adopted high standards of tax transparency
and financial regulation and that they should, therefore, benefit
from improved international acceptance".
80. The UK has agreed with each Crown Dependency
an "International Identity Framework" as a modern statement
of the relationship between the UK and each jurisdiction (see
Appendix 4 for the text of the Guernsey Framework).
Prior to this the most recent articulation of the relationship
was in the Kilbrandon Report.
The Ministry of Justice confirmed that the Framework does not
replace Kilbrandon, but aims to describe in plain language to
third parties how the relationship works in practice. As the Justice
Secretary told us, "This is the description of the relationship
rather than an establishment of the relationship".
81. The Framework includes an express acknowledgement
that, in the context of the UK's responsibility for the international
relations of the Crown Dependencies it is understood that:
- the UK will not act internationally
on behalf of the Crown Dependencies without prior consultation;
- the UK recognises that the interests of the Crown
Dependencies may differ from those of the UK, particularly in
respect of the parties' relationship with the EU;
- the UK will seek to represent any differing interests
when acting in an international capacity; and
- the UK supports the principle of the Crown Dependencies
developing further their international identities.
82. The Framework is, perhaps, the formal expression
of a process of increasing international independence which has
been underway for a number of years. For example, the Islands
are now occasionally party to treaties in their own right through
the mechanism of Letters of Entrustment issued by the UK. The
Tax Information Exchange Agreements, referred to above, were agreed
by the Islands themselves on this basis.
Concerns of the Crown Dependencies
about international representation by the UK
83. Despite the specific undertaking in the Framework
that the UK will seek to represent differing interests, in cases
where there is a potential or actual conflict between those interests,
the Crown Dependencies feel that their interests are of subsidiary
importance to those of the UK and that the end result is more
than likely to favour the latter.
84. A recent example was the role of HM Treasury
in representing the interests of the UK on the one hand, and Guernsey
and the Isle of Man on the other, in its negotiations with the
Icelandic authorities during the banking crisis.
In its written evidence, the Guernsey government stated that the
UK Government apparently prioritised its own interests over those
of Guernsey in negotiations with the Icelandic government. In
order that they might put their case directly to the Icelandic
government, the Ministry of Justice stated that HM Treasury facilitated
direct contact between the Islands and the Icelandic authorities.
The Guernsey government, however, criticised HM Treasury for a
delay in sending a letter to the Icelandic authorities requesting
that they meet with a delegation from Guernsey, this delay resulting
in the letter being sent only after the Guernsey representatives
had made their visit to Iceland.
On a more general level, the Guernsey government
expressed serious concerns about the extent to which its interests
are represented internationally, given that its representatives
are normally excluded from relevant negotiations.
85. The Isle of Man government has expressed similar
concerns in cases where the interests of the UK and the Island
conflict. It describes the support of the UK in such cases as
insufficiently robust and the Isle of Man government is concerned
about "the intractable position of not being able to represent
itself, but also not being able to gain the full support of its
It calls for the inclusion of an Isle of Man representative in
international negotiations where there is a conflict of interest
between the UK and the Isle of Man.
86. We were told that, in areas of policy which the
UK has ceded to the EU, there is an additional problem for the
Crown Dependencies. In the case of the World Trade Organisation,
for example, the UK is represented by the EU and does not send
a delegation of its own. Given that the Crown Dependencies are
neither members of the EU nor represented by a UK delegation,
they remain essentially unrepresented in that forum.
87. In evidence to us in December 2008, Lord Bach
confirmed that the UK Government "looks after the interests
in international affairs of the Crown Dependencies", but
then appeared to suggest that the Government's duties in this
respect were subsidiary to the interests of the UK.
In relation to the situation with the Isle of Man and the Icelandic
banking crisis, he told the Committee that:
We represent the interests of the Isle of Man
where it is appropriate to do so but we are part of Her Majesty's
Government, and of course that is our prime responsibility. The
Isle of Man runs its own fiscal affairs, as it runs its own legal
system and it runs everything itself; it runs its own parliament.
Our position, under this set-up, is to be the department in the
United Kingdom Government that has the closest relationship with
the Crown Dependencies and looks after its interests where appropriate,
particularly in the international forum.
This is an issue that the Isle of Man
Government has, and [it] is quite capable of talking to the Treasury
itself. We talk to the Treasury too, of course. In the end, however,
we are not dealing here with a sort of colony; we are dealing
here with a Crown Dependency that, in the case of the Isle of
Man, is self-governing, has its own systems, has its own financial
systems. It is not our job to nanny the Isle of Man in any sense.
Our job is, in the broadest sense, to have a close relationship
with them and to assist.
88. This explanation of the UK Government's role
appears to ignore the fact that Crown Dependencies have no external
personality in the international community. It is for this reason
that the Crown Dependencies pay an annual sum to the UK Government
in return for international representation and defence.
Lord Bach's statement would also appear to put the UK Government
at odds with the International Identity Framework, within which
the UK Government undertakes to "seek to represent any differing
interest when acting in an international capacity".
89. The representation of the interests of the
Crown Dependencies on the international stage by the UK Government
is not optional, according to whether or not the interests of
the Islands are congruent with those of the UK: it is the UK Government's
duty. In cases of conflict, the Ministry of Justice must endeavour
to find a mechanism for representation which will faithfully present
and serve the interests of both parties.
Possible solutions to the issue
of international representation
90. During our visits, we discussed a variety of
possibilities to address the Island' governments' concerns that
their interests were not being represented on the international
stage. The Island governments appear to have taken a pragmatic
view that the UK has been unreliable in its representation of
their interests internationally and that the time has come for
them to take a more active role on the international stage themselves.
This approach is supported by the International Identity Framework
referred to above.
Although the legal status of agreements made directly by the Crown
Dependencies with third countries, without the intermediary of
the UK Government, is unclear, Professor Sutton points out that
they are practical arrangements which have not, so far, given
rise to any disputes requiring resolution under public international
91. All representatives of the Island governments
agreed that the current processes did not serve their interests
in cases of conflict and recognised the extreme difficulty in
one individual or negotiating team seeking to represent two conflicting
interests simultaneously with any degree of credibility. This
conceptualisation of the problem led to the conclusion that a
separate individual or negotiating team should be designated with
specific responsibility for representing the interests of the
This might be achieved in several ways:
- The Ministry of Justice could
appoint an official to a negotiating team whose sole responsibility
is to present the view of the Crown Dependencies, possibly supported
by Island officials.
- Island officials could be included in the UK
delegation so that they can put their own case directly to other
- Increased use of Letters of Entrustment, either
for specific issues or for a category of issues, which have the
effect of delegating legal power to the Islands to conclude agreements
on their own behalf. This mechanism has been used successfully
in the past and the Crown Dependencies would like its use to be
extended further to give them increased autonomy and an ability
to engage directly with international partners.
92. We recommend that the Ministry of Justice
considers alternative models for the representation of the interests
of the Crown Dependencies internationally. It is imperative that
a means is found by which the Islands are represented effectively
and we strongly recommend that certain officials, either from
the UK or from the Islands, be specifically designated as representing
the Islands in international negotiations. Clear and unambiguous
representation of the Crown Dependencies' interests on the international
stage will assist them in building their relationships with third
countries and international organisations and, consequently, help
them to develop their international identities, as envisaged in
the Framework document agreed with the UK.
93. For the same reasons, in cases where international
activity leads to the creation of legal relations, we strongly
support the increased use of Letters of Entrustment in appropriate
circumstances, allowing the Crown Dependencies to enter into binding
agreements themselves without the need for direct ratification
from the UK.
88 Q 65; Ev 89 Back
Q 12; Sutton, A., (April 2008), The evolving legal status of
the Crown Dependencies under UK, European and International Law,
White & Case: Brussels Back
Q 34; Ev 47 Back
Ev 45; Ev 69; http://www.oecd.org/dataoecd/38/14/42497950.pdf Back
Foot, M., (2009) Final report of the independent Review of British
offshore financial centres, Chapter 1. Available at http://www.hm-treasury.gov.uk/indreview_brit_offshore_fin_centres.htm
Qq 14, 111 Back
Part XI of Volume 1 of the Report of the Royal Commission on
the Constitution, 1969-1973, Cmnd 5460 Back
Q 21, oral evidence on The Work of the Ministry of Justice,
7 October 2008, HC 1076-i Back
Ev 46 Back
Ev 70; Ev 95 Back
We have reported elsewhere on the facts of the conflict of interest
which arose between the UK and two of the Crown Dependencies-Guernsey
and Isle of Man-as a result of the Icelandic banking crisis. See
Crown Dependencies: evidence taken, First Report of the
Justice Committee Session 2008-09, HC 67. See also Ev 73 &
Ev 81. Back
Ev 89 Back
Ev 95 Back
Ev 95 Back
Ev 70 Back
Ev 72 Back
An analogous case occurred when the Guernsey Post was in dispute
with the Royal Mail. The Guernsey Post wished to take its grievance
to the Universal Postal Union for a resolution, but this was not
possible: within the Universal Postal Union, the Guernsey Post
is represented by the Royal Mail because it cannot afford its
own membership. Back
Crown Dependencies: evidence taken, First Report of Session
2008-09, HC 67, Q3 Back
Qq 7, 9 Back
Crown Dependencies: evidence taken, First Report of Session
2008-09, HC 67, Ev 6 Back
International Identity Framework, para.1 Back
Framework, Paragraph 3. Back
Sutton, A., (April 2008), The evolving legal status of the
Crown Dependencies under UK, European and International Law,
White & Case: Brussels. Back
Ev 72 Back
Q 34 Back
Qq 79, 109 Back