Crown Dependencies - Justice Committee Contents

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.[88]

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 personalities".[89]

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.[90]

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.[91] 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".[92]

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).[93] Prior to this the most recent articulation of the relationship was in the Kilbrandon Report.[94] 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".[95]

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.[96]

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.[97]

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.[98] 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.[99] 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.[100] 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.[101]

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 "representative".[102] 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.[103]

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.[104]

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.[105] 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.[106]

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.[107] 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".[108]

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.[109] 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 law.[110]

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 Crown Dependencies.[111] 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 negotiating parties.[112]
  • 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.[113]

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

89   Q 12; Sutton, A., (April 2008), The evolving legal status of the Crown Dependencies under UK, European and International Law, White & Case: Brussels  Back

90   Q 34; Ev 47 Back

91   Ev 45; Ev 69; Back

92   Foot, M., (2009) Final report of the independent Review of British offshore financial centres, Chapter 1. Available at  Back

93   Qq 14, 111 Back

94   Part XI of Volume 1 of the Report of the Royal Commission on the Constitution, 1969-1973, Cmnd 5460 Back

95   Q 21, oral evidence on The Work of the Ministry of Justice, 7 October 2008, HC 1076-i Back

96   Ev 46 Back

97   Ev 70; Ev 95 Back

98   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

99   Ev 89 Back

100   Ev 95 Back

101   Ev 95 Back

102   Ev 70 Back

103   Ev 72 Back

104   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

105   Crown Dependencies: evidence taken, First Report of Session 2008-09, HC 67, Q3 Back

106   Qq 7, 9 Back

107   Crown Dependencies: evidence taken, First Report of Session 2008-09, HC 67, Ev 6 Back

108   International Identity Framework, para.1 Back

109   Framework, Paragraph 3. Back

110   Sutton, A., (April 2008), The evolving legal status of the Crown Dependencies under UK, European and International Law, White & Case: Brussels. Back

111   Ev 72 Back

112   Q 34 Back

113   Qq 79, 109 Back

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