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Confederation of the Channel Islands: next steps?

09 November 2012

Chief Minister, Your Excellency, Ladies and Gentlemen,

May I first of all extend on behalf of the Editorial Board a very warm welcome to this important conference on the future destiny of the Channel Islands? I am extremely grateful to our sponsor, Mourant Ozanne, and Advocate Gordon Dawes in particular, for the generous support that they have given, without which this conference would not be taking place.

Some of you were present at the last conference organised by the Jersey and Guernsey Law Review in 2010, and this is in a sense a sequel to that conference. The booklet containing a transcript of the proceedings on that occasion is in your conference pack. This time, however, we are more concerned with relationships closer to home. The concept of federation was first addressed by the Deputy Bailiff of Guernsey, then HM Comptroller, in his presentation in 2010, but today we want to examine it, and the related concept of confederation, more closely. What is the difference? In a nutshell, a confederation coordinates the powers of separate states, while a federation unifies them into a single state. Neither is a precise term of art, as will be explained in due course. But in general a confederation involves a constitutional structure where power passes upwards from the constituent parts (i.e. the Bailiwicks of Guernsey and Jersey), while in a federation, power is delegated downwards from the new federal state. The title of the conference mentions confederation, because our assumption is that the Bailiwicks of Guernsey and Jersey would remain separate, but might wish to merge their functions or institutional powers in certain respects.

Why do we want to talk about confederation? Well, the truth is that we have already set out upon this federal journey and the only real question is whether or not we want to know at this stage where we are going. Do we bumble along hoping that all will turn out for the best, or do we apply our minds to these important constitutional issues? To some, confederation may be another long and frightening word, but joint Channel Island institutions are not a new idea. In 1949 it was assumed by the Home Office that the Channel Islands would have a single Court of Appeal, and an order-in-council was actually made constituting such a court. It never came into effect, although the current judges of the separate Jersey and Guernsey Courts of Appeal are substantially the same people. At a different level, the States of Jersey will shortly debate an amendment to the Royal Court Law which will allow Guernsey jurats to sit in the Jersey Royal Court. There are practical reasons of necessity for this change, just as there are practical reasons that have led to the establishment of a joint Channel Islands office in Brussels and a joint Channel Islands Competition Regulatory Authority. The opportunity has also been taken to appoint the same individual as the Data Protection Commissioner in both Islands. The cooperation between the Channel Islands of which politicians have been speaking for many years has actually come to pass. 

One could argue that that the Channel Islands Brussels Office (CIBO) has already created the need for a federal authority. To whom are the very able officials in CIBO accountable? The immediate answer is that they are accountable to the directors of a Belgian company owned by the two Bailiwicks. Those four directors are the senior officials and accounting officers in the Chief Ministers’ departments in Guernsey and Jersey who are rightly responsible for oversight of budgets and personnel. But where is the political accountability for policy decisions? Technically it is to the Chief Ministers of the two Islands, although both have delegated the responsibility to a minister in Jersey and another in Guernsey. The Gospel of St Matthew tells us that no man can serve two masters, but that is exactly what happens in CIBO. The officials must erect Chinese walls where there are differences in policy between Jersey and Guernsey, but that is not a long-term solution. There should be a properly constituted mechanism for the Islands to make combined policy decisions on European matters that balance the best interests of both Bailiwicks. There is already a need for a federal structure in the conduct of foreign affairs.

But what kind of federal structure? In a voyage of discovery of this kind, it is important to hold on to fixed points. For my part, I assume that the Bailiwicks of Jersey and Guernsey will always remain separate entities, with their own governments, legal systems and courts of law. There will always be a Bailiff of Jersey and a Bailiff of Guernsey. Alderney and Sark will always maintain their own respective separate identities. All these separate identities go back into the mists of time, and are an important part of our history, heritage and culture. They are precious, and should not be abandoned. They are fixed points.

I confess that I am, and always will be, first and foremost a Jerseyman. That national identity has become more important to me as I have grown older. I am sure that there are many in this room, like my good friend Sir de Vic, who feel exactly the same way about Guernsey. Identity, however, is a little bit like loyalty. In our personal lives we feel loyalty primarily to spouse and children, then to the wider family, then to friends and colleagues and so on. The circles spread outwards as when a stone is dropped in water. So my next most important identity is as a Channel Islander. That too has become more important to me over the years. I had the honour to sit in the Guernsey Court of Appeal for nearly 15 years, and I learned a great deal about the character of Guernsey people, although it is actually not very different from that of Jersey people. The stubbornness of the donkey is not unknown in Jersey too. But then we all have the sturdy independence of mind and self-reliant spirit that comes with being an Islander. And the outer ring of my identity circle is that I am British.

Identity as a Guernseyman or a Jerseyman is not inimical to identity as a Channel Islander, and that Channel Island identity has been growing in recent years. In Jersey we are proud to claim Heather Watson as a Channel Islander, and it was interesting that that young Guernsey tennis star was described in that way in many of the media reports. It was the same with Carl Hester, the Sarkese Olympic equestrian champion. If I may say, en passant, in the context of the Olympics, was it not slightly disappointing that neither Jersey nor Guernsey, unlike the Cayman Islands, Bermuda, and the BVI, played a part in the opening ceremony? There is work to be done both individually and collectively on national identity in that respect.

Why is this Channel Island identity growing? It is very simply that when there is an external threat, we are Channel Islanders, and not Guernsey or Jersey people. Sadly, external threats are more frequent than they used to be. Some come from Europe and the USA, but some come from the United Kingdom. Membership of the wider British family does not mean that we all share the same interests. The UK’s economic and political interests are often different from ours. In the LVCR case earlier this year counsel for HM Treasury and HMRC stated expressly to the High Court, on instructions no doubt, that it was of no concern to the UK government if a measure to protect the UK tax base caused economic damage in the Channel Islands. This is to be expected where our political and economic interests diverge. We should expect equally disinterested attitudes in the foreseeable future if it appears to either the UK or the EU that disinterest in our affairs is in the interests of their economies. We have therefore to do what every country does and that is to defend our own interests. As Crown Dependencies we have less room for manoeuvre, perhaps, than sovereign states, but there is no doubt that if we stand together as Channel Islanders, and present a common position, we will be stronger than if each Bailiwick stands on its own.

Inconsistency is a weakness, and weakness can be exploited by opponents. The other, and perhaps more positive, side to the consistency coin is that it makes it easier for our sovereign state to deal with us. From the viewpoint of the Ministry of Justice, it creates unnecessary complications if Guernsey and Jersey adopt different positions. Support can usually be given if the Channel Islands adopt a common reasonable position, but if there is a dispute what is the UK to do? Generally, and the fisheries dispute a few years ago is a good example, the UK will sensibly sit back and say -  “You sort it out”. The deeper our links can be, the more likely it is that this kind of problem can be resolved as an internal matter.

What then can one say about the advantages of working more closely together? They seem to me to be political and economic. Some of these advantages are obvious. The creation of the Channel Islands Competition Regulatory Authority has been calculated to have saved each Island at least £100,000 a year. In data protection the saving has been of one senior salary. But these savings, while important steps forward, are probably scratching at the surface of what could be achieved. Both governments are developing new limited liability partnership laws, and other financial services legislation using expensive legal and administrative time in both Islands. Considerable savings would result from combining efforts in treasury departments, in the prisons, in the police, and probably in health.

What is less obvious are the in-house potential savings for companies and firms operating in both Bailiwicks. To have the same employment laws would avoid the complications that arise for human resources managers. Would the same regulatory environment diminish the costs of doing business in both Islands? What advantage is there to regulatory arbitrage? The Trusts (Guernsey) Law 1988 was modelled on the Trusts (Jersey) Law 1984 but there are some important differences; would it be an advantage to have a federal law – a Trusts (Channel Islands) Law?

This leads on neatly to the obstacles in the way of working more closely together, and there are many. Is there an advantage to competition? Jersey and Guernsey engage in what one speaker at the Institute of Law Trusts conference described as “leap-toad”. Guernsey finds that there are defects in the Jersey law that it has copied and corrects them. Jersey follows suit, only to find that Guernsey has once more got ahead of the game and brought in amendments that give a market advantage. And so on. Is this helpful local competition, or should the Channel Islands be pooling their skills and competing globally against Luxembourg, Singapore and the Cayman Islands to win new business in Eurpoe, Asia and the Americas?

We need to acknowledge the fears of being swamped, and of progress being held up. A disadvantage of partnership is that one has to advance at the speed of the slowest partner. A Scrutiny Panel in Jersey recently criticized the Jersey government for its slowness in working on a Channel Islands Aircraft Registry. Guernsey then announced that it might move ahead on its own. I hope that Jersey will catch up in that project, but the problem is more general. Speed to market is vital if we are to compete effectively with the world outside. If we are to work together, our institutions must be capable of delivering the decision-making that is required.

In both Islands, if I may be frank, there is much work to be done to get our political and governmental institutions in good working order. In Jersey there is a problem at the heart of government. As the Chief Minister has candidly stated, there is no single leader who is fully in charge. Without the power to appoint and dismiss ministers as necessary, the Chief Minister is denied the basic mechanism needed to ensure discipline. It is no different in Guernsey. These domestic issues have to be resolved before any serious advance towards confederation can take place, but that is no reason for failing to do some blue-sky thinking about what might be to our mutual advantage in the future.

And then there are more than 800 years during which the Channel Islands have mostly operated in silos, taking crucial decisions independently of the other and often arriving at different conclusions. The best jokes in Jersey are about ânes while in Guernsey they are about crapauds. Guernsey tilts mainly to the north while Jersey inclines to the south, naturally looking away from each other. Can one overcome the weight of history and geography?

The Jersey and Guernsey Law Review is immensely grateful to our distinguished speakers for agreeing to share with us their expertise and experience. We hope that the presentations and discussion will help to illuminate a path for us to the advantage of all the people of both Bailiwicks.

The first session will give us a high level view of what the options are if the Channel Islands were to decide to move towards confederation. Professor Jowell and his colleague at Blackstone Chambers, Iain Steele, will speak of the distinctions between confederation and federation, and explain what institutions we would need to develop if we wished to formalize our association in that way. The Deputy Bailiff will speak of the options in terms of federal judicial institutions, and the enforcement of any federal law that might come into existence.

The second session will describe what is actually happening on the ground in terms of governmental cooperation – and some may be surprised at the extent of the existing collaboration. Senator Routier and Deputy Le Tocq will give the Jersey and Guernsey perspectives, and they will be followed by the Attornies of both Islands. HM Procureur will shed light on what is a dark area for most Jersey people, namely the relationships between Guernsey, Alderney and Sark.

The third session will involve governmental, regulatory, and industry perspectives on confederation and/or collaboration in the vital sphere of financial services. Should the regulatory processes be merged or move closer together? Should we have a Channel Islands Central bank or Monetary Authority? Is there a view from industry, the banks, trust companies, lawyers and accountants on the question of confederation?

In the final session we hear from experts who have broad experience of federations. Mr Alexis Lautenberg, known to several of us as the former Swiss ambassador to the Court of St James, His Excellency Dr Kevin Isaac, the current High Commissioner for St Kitts and Nevis, and Dr Derek O’Brien, an Oxford academic working on federations, particularly in the Caribbean, will share their expertise with us. 

In the context of Channel Island cooperation there is a whole spectrum of possibilities available to us. At one end we could have a Federation of the Channel Islands where our destinies are completely merged. Further down we have a confederation where certain governmental functions are merged and federal institutions created. Further down still, we have ad hoc cooperation in areas where it is economically or politically sensible to have it. What we must try to avoid, it seems to me, is getting ourselves inextricably interlinked without establishing the constitutional mechanisms to resolve disputes and to ensure effective administration. These are very important issues for the people of both Bailiwicks.

May I conclude by expressing the hope that it will be a stimulating and enjoyable day? I wish you all a very warm welcome.

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