When conference chair Richard Wilson QC delivered the opening remarks at the 8th International Trust & Private Client Conference on Oct. 5 at Kimpton Seafire Resort + Spa, he said the trusts industry was facing challenges from a variety of sources.
“It makes the life of trust professionals increasingly difficult,” he said, adding later in the conference that “there are more ways of getting it wrong than ever.”
Dealing with the challenges requires thinking ahead, getting advice and implementing procedures, Wilson said, and the conference agenda addressed all three requirements in some fashion.
One theme of this year’s conference focused on the impacts of various legislation and international initiatives on confidentiality in the trusts industry. A panel discussed data protection legislation in one of the morning sessions, noting that although the European Union’s General Data Protection Regulation came in to effect in May of this year, the U.K. has had the Data Protection Act in force since 1998.
Panelist Suzanne Marriott said that one of the trends she is seeing as a result of the 2017 U.K. Court of Appeal decision in the Dawson-Damer case is that people are submitting subject access requests — better known as SARs — permitted by the Data Protection Act as a way of finding out information about trusts that wouldn’t be accessible through other means.
“SARs are being used to start fishing expeditions,” she said, adding that as a result, trust professionals need to change the way they collect and store data.
Marriott also noted that many trust professionals haven’t spelled out in their engagement letters who pays for SARs, which can involve sifting through thousands of documents.
“We’ve seen small firms in London go under having to comply with these,” Marriott said, suggesting that trust professionals should no longer keep drafts or notebooks relating to the trusts with which they’re involved.
“It goes against the idea we should keep everything, but we should just talk about it and not write anything down because if we do, it can become something that will end up in a courtroom.”
Because the Dawson-Damer decision ruled that the motive for submitting a SAR is irrelevant, lawyers are submitting them for a variety of reasons on behalf of clients.
“It’s a huge tool to aggravate the process and take someone off their day job,” Marriott said, adding that the request could lead to the disclosure of one nugget of information that can be used in parallel legal proceedings that wouldn’t have been disclosed otherwise in the parallel proceedings.
After lunch, Wilson came to the podium again, this time to “debate” fellow Queen’s Counsel Nikki Singla on the merits of a motion stating, “Fairness in society depends on there being a high degree of transparency in the affairs of wealthy people.”
Suggesting that “sunlight is the very best of disinfectants,” Singla said people should accept that knowing who really owns companies helps combat money laundering.
Singla said that “modern financial engineering is all designed to avoid taxes,” which is another reason for transparency. He also said non-payment of court orders has become a “national epidemic” in the U.K. The lack of information about debtors and the inability to reach the assets of those debtors are also reasons why transparency was the best policy.
Arguing against the motion, Wilson said that efforts to increase transparency through instruments like a public beneficial ownership registry would only lead to “more and more convoluted structures that people will use to hide assets.”
“This just will not work,” he said. If governments want to try and curtail legal tax avoidance, Wilson said “they can and should do something about it” through legislation.
“If that is happening, governments should not be lazy,” he said. “It should not expect the court of public opinion to sort it out for them.”
Wilson also took exception to the motion targeting only wealthy people, suggesting that if transparency was supposed to be a good thing, “then why not have it for everyone.”
“To single out what might be considered wealthy is unfair,” he said, adding that targeting only the wealthy would make those people targets for crimes. “A beneficial ownership registry will become a guidebook for criminals.”
As expected in a room full of trust professionals, the motion failed when put to the audience for a vote, with only a few people voting in favour.
SIR JEFFREY JOWELL
Although it was clear that the audience didn’t think a public beneficial ownership registry was a good idea, keynote speaker Sir Jeffrey Jowell said the Overseas Territories, including the Cayman Islands, don’t have much of a chance to prevent them now that the U.K. Parliament has mandated public beneficial ownership registries by the end of 2020.
Sir Jeffrey noted that the Cayman Islands already has a central beneficial ownership registry that, although not public, “is probably more extensive and more reliable than the U.K.’s registry.” He also noted that the there is no international requirement for jurisdictions to have a public beneficial ownership registry, so the U.K.’s insistence that the Overseas Territories implement them is not to comply with international standards.
Sir Jeffrey advised the Cayman Islands government extensively through the constitutional modernisation process that led to the ratification of a new constitution in 2009, and he is advising them again with regard to the U.K.’s possible constitutional overreach in relation to its requiring the Overseas Territories to implement public beneficial ownership registries. Although Sir Jeffrey said the Cayman Islands could legally challenge the U.K. on the basis that mandating public registries of beneficial ownership is an incursion on the domestic powers of the Cayman Islands as enshrined in the constitution, he believes it would be “extremely difficult” to mount a successful challenge. Central to that belief is the fact that Parliament has unlimited power to legislate for the Overseas Territories.
“A constitutional convention has no legal effect over the acts of Parliament,” he said.
Sir Jeffrey noted that there are prominent people in the U.K. who also disagree with Parliament’s decision to force public beneficial ownership registries on the Overseas Territories, including Lord Neuberger of Abbotsbury, the former president of the Supreme Court of the United Kingdom. Sir Jeffrey read what Lord Neuberger said in May.
“Unlike most countries, our constitutional arrangements are based on conventions and mutual respect rather than pieces of paper, and we break those conventions and trample on that mutual respect at our peril,” Sir Jeffrey read. “There has been no consultation with the democratically elected governments of any of the territories about the legislation. There has been no investigation of the effectiveness of this law in relation to any of the territories. There has been no inquiry as to the economic and social consequences of the legislation on any of the territories. I regret to say that the proposed law appears to be old-style colonialism at its worst: damaging legislation which has no cost for the legislating country, but which will cause hardship to the victim countries, and does so not merely without representation, but without consultation or full investigation.”
Sir Jeffrey also quoted Minister of State for the Overseas Territories, Lord Ahmad of Wimbledon, who also spoke about the issue in May:
“Let me be absolutely clear,” Sir Jeffrey read from Lord Ahmad’s address in the House of Lords. “The overseas territories are British, but they are separate jurisdictions with their own democratically elected governments, responsible for their own fiscal matters and are not represented in this Parliament. We have legislated for them without their consent only in exceptional circumstances, for example to decriminalise homosexuality in certain territories to ensure that they were compliant with international human rights obligations. By contrast, financial services are an area of domestic responsibility for territory governments, where they surpass — an important point to remember — international standards in the context of beneficial ownership. Legislating for these jurisdictions without their consent in this field effectively disenfranchises their elected representatives.”
Sir Jeffrey said that the most effective challenge of Parliament’s edict would be one under the Bill of Rights section about privacy in the Cayman Islands Constitution.
“That section is very powerfully worded,” Sir Jeffrey said, noting the key argument would centre around the proportionality of the action to enforce transparency to the detriment of privacy.
“Can it be justified by saying it is fulfilling a pressing social need?” he asked, adding that the Cayman Islands already has safeguards in place to promote transparency. The Cayman Islands could therefore argue, “If it aint’ broke, don’t fix it with something that might be unnecessarily intrusive,” Sir Jeffrey said.