07 March 2017 by Jonathan Le Tocq
The island has planned ahead for the UK leaving the EU
Last June we were able to put a policy paper, the ‘States of Deliberation’, before Guernsey’s parliament, on how we would manage the implications of Brexit for Guernsey. This was achieved within days of the UK’s referendum result last June.
That paper was the result of contingency planning over the past few years in the event of the UK choosing to exit the EU. We had already begun to scope out our options, and this demonstrated that Guernsey was as prepared as it could be for every eventuality. Since then we have worked closely with businesses, representative bodies and our regulator, the Guernsey Financial Services Commission, to understand what opportunities may lie ahead of us.
Guernsey’s formal relationship with the EU is through Protocol 3 to the UK’s 1972 Accession Treaty to the EU. By virtue of Protocol 3, Guernsey is essentially in the single market only for the purpose of trade in goods and this protocol also requires Guernsey to treat all natural and legal persons of the EU in the same way. However, in every other respect, and significantly in terms of services, Guernsey has never been part of the EU. We are deemed to be a third country.
In this capacity, for decades we have successfully negotiated our own access to EU financial markets as a non-EU jurisdiction. Most significantly this means that with or without Brexit, our main trading relationships, such as those in financial services, will remain intact.
“Guernsey’s track record in adapting to changing global markets and meeting international standards is exceptional”
Recognising our constitutional and relational uniqueness, the UK’s Prime Minister formally committed to engaging with Guernsey throughout the UK’s withdrawal process to ensure that all our interests are taken into account, especially post-Brexit opportunities. That engagement so far has been a model of best practice and we are working together on four priority areas outlined in our initial policy paper:
Although the impact of Brexit is more discreet and nuanced for Guernsey than for the UK, engaging in this manner we are ensuring we are part of the discussion for those issues which do affect us, with a view to what happens next rather than being merely a passenger on the journey.
It has always been important that we maintain control and adapt in a way that works for Guernsey. We have been doing this since 1204 – the year Guernsey became self-governing, independent from the Duchy of Normandy.
Guernsey’s track record of adapting to changing global markets and meeting international standards is exceptional. ‘Small but nimble,’ I like to quip. We have developed the capacity and skills, over the years, in our unique position, to move, adapt, and even legislate expeditiously and efficiently. We have needed to do so. In many respects, therefore, one might say it is ‘business as usual’ for us, and this is certainly an area of stability and security through the Brexit process and beyond.
It will be important for Guernsey to continue to be consistent and meet international standards so that we are able to protect our post-Brext future. For instance, Guernsey’s recognition as an OECD member is related directly to its relationship to the UK, and the UK’s membership of the OECD is direct, not via the EU.
Brexit will also have no impact on our Foreign Account Tax Compliance Act (FATCA) or Common Reporting Standards status – neither are contingent on the UK being an EU member.
We manage a global network of tax agreements which are negotiated and signed directly between Guernsey and the relevant countries. As part of this agenda, Guernsey has signed up to the OECD’s Base Erosion and Profit Shifting (BEPS) agenda, which seeks to put in place new international standards of transparency and cooperation. As a member of the BEPS Inclusive Framework with many EU and G20 members, Guernsey will be involved in the shaping and measurement of the new standards.
In terms of regulation, Guernsey remains ahead of the curve, providing a robust and flexible regime. The European Council’s very recent MoneyVal assessment shows that Guernsey remains one of the leading jurisdictions in combatting financial crime in its own right – something that should not be underestimated in today’s environment.
Through meeting international standards and applying an effective regulatory regime, we have a place in the international mainstream and Guernsey is in the privileged position to provide stability for business in a time of uncertainty.
“Our strength is our impressive skills base with a talented pool of professionals who have the knowledge and expertise to work in a fast-changing international environment”
Guernsey is one of a small number of non-EU jurisdictions to have been assessed by the EU as meeting current EU data protection standards and thus granted equivalence. The same strategy to achieve market access has been applied in other areas. For example, we have been officially deemed as equivalent by the EU under the Statutory Audit Directive, the Wire Transfer Regulation and the Capital Requirements Regulation.
To reiterate, these relationships do not change as a result of Brexit and we will continue to develop them both through our constitutional relationship with the UK as a Crown Dependency, as well as directly using the Channel Island Brussels Office to ensure we continue to have that access to the EU as a third country.
Our international position and unique identity gives us the platform from which we will actively look for new business opportunities as the UK changes its relationship with the EU. The UK has announced it will seek new trade deals that suit the UK, including new free-trade agreements.
Guernsey’s industry has established strong business links in Asia, South America and Africa. The possibility of developing trade agreements on the same terms as UK businesses to underpin these relationships is an exciting prospect and one that in the past has not been possible for Guernsey in the same way while the UK has been a member of the EU.
Partnering with industry will be vital throughout the UK’s negotiations. Our strength is our impressive skills base with a talented pool of professionals – totally disproportionate to our size – who have the knowledge and expertise to work in a fast-changing international environment.
In the recent past Guernsey’s Government has worked with industry to establish innovative products such as protected cell companies, foundations, the private investment fund regime, the world’s first image rights register, and the Channel Islands Aircraft Registry (2-REG). These have all been developed and supported by government, together with industry, to keep pace with new markets and new products.
The momentum now is to continue to be innovative, drawing on our industry’s expertise to access new markets and develop new ideas, either through brokering new trade deals or pursuing bifurcated regulatory regimes.
In this sense, adapting to a changing business environment is nothing new for Guernsey. As a third country to the EU we are well used to adapting to market requirements. We have proved to be a safe haven and are now in a prime position to maintain our solid, secure and stable environment for business.
Guernsey Conference 2017
Jonathan Le Tocq is speaking at ICSA’s Guernsey conference on 26 April. For more information about any of ICSA’s regional conferences, visit the ICSA website.