10/10/18

CAYMAN ISLANDS: Challenging the UK’s Imposition of Public Registers of Beneficial Ownership.

(Cayman Compass) --- Challenging the section of the U.K. Sanctions and Anti-Money Laundering Act that threatens to establish public beneficial ownership registers in the overseas territories – if necessary through an order in council – would face major obstacles, according to Sir Jeffrey Jowell, QC, the lawyer who is working with the Cayman Islands government on its response to the action.

Case law generally upholds the “sovereignty of parliament” and confirms that courts cannot hold the acts of parliament invalid, even if they were considered improper, he said at the Mourant Trust and Private Client Conference at the Kimpton Seafire resort last week.

He echoed the position of the Cayman Islands government that challenging the Sanctions and Anti-Money Laundering law itself was difficult and unlikely to succeed. The government announced in May it would therefore wait until an order in council is issued before mounting a challenge in the Cayman courts.

The most effective challenge would be under the Bill of Rights of the Cayman Islands Constitution, Mr. Jowell said, adding that the 2009 constitution established a “new baseline” in the relationship between the U.K. and Cayman.

Section 55 of the constitution carves out the governor’s responsibility for defense and external affairs but devolves all other policy areas to Cayman lawmakers and the government. This includes the responsibility for economic and financial affairs.

One challenge under Cayman law would be that an order in council was “an unlawful trespass on the devolved powers of the Cayman Islands.” He said the U.K.’s responsibility for the external affairs of the Cayman Islands could only apply if there were an international obligation to have public registers of beneficial ownership, which in this case does not exist.

Under section 125 of the constitution, the Queen also has the right to intervene on the grounds of “peace, order and good governance,” a catch-all phrase which some believe could encompass anything.

However, a recent report from the House of Commons Justice Committee noted about the Crown Dependencies that “these days where you have an elected legislature, there is a high degree of consensus that good governance could only be called in question in the most serious of circumstances,” and “are only likely to include a fundamental breakdown in public order or endemic corruption in the government legislature or judiciary.”

An example for such circumstances was the U.K.’s 2009 intervention in the Turks and Caicos Islands in response to widespread government corruption.

The same principles outlined by the Justice Committee would apply in the overseas territories, Mr. Jowell said.

“Probably the most effective challenge would be, depending on what is introduced in the way of a public register, under the Bill of Rights section,” the constitutional law expert said. Especially section 9 of the Constitution on privacy “is very powerfully phrased.”

He noted that privacy is not an absolute right and can be limited for a variety of reasons, including national security and the fight against crime, but those limitations must adhere to the concept of proportionality.

“So, the real battleground, if this is to be challenged in the future, is likely to be whether the limitation on private life imposed by the order in council can be justified by fulfilling a pressing social need,” Mr. Jowell said. “And if so, whether the means chosen to achieve the relevant aim is proportionate to that aim.”

He said there is sufficient case law to support such a challenge, including a case in which the French Conseil Constitutionnel (Constitutional Council), declared France’s public trust register unconstitutional because it represented a disproportionate breach of the privacy rights of individuals that are part of trust arrangements, given that the information was already available to tax authorities.

The ruling had the effect of limiting access to the trust register to law enforcement, regulators and certain groups of professionals regulated under French law.