Coming Up in the States

What's happening in the States this week? Here's a brief overview plus commentary.
Proposition: Draft States of Jersey (Minister for External Relations) (Jersey) Regulations 201-.
Reference: P67/2013
The preamble for this proposition sets forth the rationale for having a Minister for External Affairs or Foreign Affairs. This doesn't involve any extra expenditure; there will not be an extra Ministry set up with Chief Officer and underlings. And it does seem to me an eminently sensible way to proceed - it's something which the Isle of Man certainly has.
"The international norm is for each jurisdiction around the world to have 3 positions in order to conduct external relations. These 3 positions are: (1) Head of State (for Jersey, Her Majesty the Queen), (2) Head of Government (for Jersey, the Chief Minister), and (3) Minister for Foreign Affairs (not at present a ministerial post in Jersey and hence now proposed as Minister for External Relations). The United Nations Protocol and Liaison Service maintain an up-to-date reference list of Governments with official titles of the respective Heads of State, Heads of Government and Ministers for Foreign Affairs."
"There would be enhanced accountability to the Council of Ministers, as a Minister would be in attendance at each Council meeting to account for their actions in a way that is not necessarily the case with an Assistant Minister. There would be improved accountability to the States Assembly, as a Minister would be voted into office by Members and would be required to regularly answer questions in the Assembly and appear before scrutiny as is the case with other Ministers."
But I would like to suggest that the Assistant Minister who currently deals with Foreign Affairs should not automatically be promoted into the new position. It is a new position, and while I am sure that many people will consider that Senator Bailhache has done sterling work, the new position should start as it means to continue. And that means a proposal for the candidate by the Chief Minister, with the possibility of other candidates being proposed, with an ensuing election decided by open ballot.
Proposition: Draft Loi (201-) (Amendement) sur la Voirie. Reference: P.70/2013
"Give greater flexibility in the dates of the Visites du Branchage by extending the period from 15 days to 21 days (21 days from 24th June and from 1st September) - Article 7"
This proposition was due much earlier in the year, and has rather missed the time this year. It also made much needed changes to the position regarding Branchage regarding responsibility in the case of co-ownership association (in the case of flying freehold); and the company (in the case of share transfer flats).
I dealt with the law changes there in detail on my article on the Rosscot Chartered Accountants website:
Proposition: Draft Public Finances (Amendment No. 4) (Jersey) Law 201- Reference: P.73/2013
Establishment of the States Insurance Fund;
Medium Term Financial Plan and Heads of Expenditure;
Role and Remit of the Treasurer;
Extending the Accounting Officer role;
Formalisation of the Fiscal Policy Panel; and
Miscellaneous - Law to be amended by Regulation; and amendments to the administration arrangements for Special Funds.
"The final part of the amendment enables the Minister for Treasury and Resources to make Regulations to amend Parts 3 and 4 of the principal Law (excluding Article 15 which deals with the power to give immediate effect to a Law that is a taxation draft). These Parts deal with the States administrative process for the Medium Term Financial Plan and Budget and States Trading Operations. The States would still be required to approve any amending Regulations, but these would not require further approval by the UK Privy Council."
As there is a backlog of around 130 laws (or amendments to laws), anything which speeds up the process of how the States operate is to be recommended. This has the advantage that it permits changes to regulations which do require approval by the States, but would no longer require the sometimes lengthy wait for approval by the Privy Council.
Proposition: Draft Public Finances (Amendment No. 4) (Jersey) Law 201- (P.73/2013): amendment. Reference: P.73/2013(Amd)  - Corporate Services Scrutiny Panel
"The Fiscal Policy Panel is an independent advisory body to the States, and this position must be reflected in every aspect of the primary legislation. In order to maintain its independence, the Panel propose an approach which follows a similar process to the appointment of the Comptroller and Auditor General. It is based on the requirement that following a selection process, a Proposition that has been signed by both the Chief Minister and the Minister for Treasury and Resources should be brought to the States for its approval of appointment."
This is an important amendment because it ensures that while the selection process is in the hands of Chief Minister, the final approval of that appointment must be made by the States.  It ensures that proper scrutiny can be made of the appointment, and any concerns about conflicts of interest raised in the States Chamber.
Proposition: Jersey Appointments Commission: re-appointment of member. Reference: P.79/2013
"The re-appointment of Commissioners to the Jersey Appointments Commission, to re-appoint Mr. Julian Rogers, as a Commissioner of the Jersey Appointments Commission until 23rd February 2014."
"The Commission consists of a Chairman and 4 other Commissioners. The Commissioners are required to meet 4 times per year, to contribute to the production of guidelines that will apply to States' employees or States' appointees, to audit recruitment and to oversee recruitment to senior posts."
It should be noted that Julian Rogers is also wearing another hat - he is Chairman of the States Remuneration Panel, which decides on States Members pay. This has occurred before, and I've already discussed potential conflicts of interest in a previous blog:
Proposition: Draft Adoption (Amendment No. 6) (Jersey) Law 201-. Reference: P.80/2013
"The amendment's purpose is to repeal paragraph (3) of Article 11 of the 1961 Law which prevents a single male from adopting a female child unless the Court determines that there are 'special circumstances'"
"It is worth noting that since these 2 cases the 1961 Law has been amended to take account of the Civil Partnerships (Jersey) Law 2012 which has accorded civil partners the same rights as married couples when adopting. Nevertheless, as occurred in 2009 and 2011, homosexual male partners who are not in a civil partnership continue to be prevented from making a joint application to adopt female children. Consequently, in its written judgements to both cases, the Court expressed the hope that the legislature might consider whether article 11(3) of the 1961 Law ought not to be repealed."
"This call was prompted in the first instance by the Court's understanding that the provision is based on an outdated rationale which essentially holds that men pose a de facto risk to female infants. Furthermore, it assumes that fathers are unable to meet the emotional needs of a female infant whereas, presumably, a mother is capable of meeting those of a male infant; insofar that nothing prevents women from adopting a male child."
This brings Jersey in line with the UK and changes the situation regarding who can adopt, removing the part of the legislation which was biased against the adoption of a female child by a male couple. There was an asymmetry in the assumptions of the law, and it is only right and proper that it be changed. In fact a recent Cambridge University study showed that:
"In-depth research into the experiences of adoptive families headed by same-sex couples suggests that children adopted by gay or lesbian couples are just as likely to thrive as those adopted by heterosexual couples. It also reveals that new families cope just as well as traditional families with the big challenges that come with taking on children who have had a poor start in life. "
This might however court some unpopularity in various quarters because of religious reasons, and it will be interesting to see if religious bias surfaces in the debate or whether the proposition gets implemented as a matter of routine. There was, after all, considerable disquiet among religious adoption agencies in the UK. Notably around 2007, Catholic Church bid to be exempt from UK laws on adoption by gay couples, and leading members of the Church of England weighed in on their side

Beneficial Ownership and American Exceptionalism

"Russia, Canada and the US despite the encouraging language were not up for public registries and full disclosure of beneficial ownership. Competition, costs, and privacy concerns, not to speak of the UKs own position, arguably along with the US (Delaware), the weakest of the G8, must have been a handicap." (Geoff Cook, Jersey Finance)
The first move towards transparency must be beneficial owner registers kept by a regulatory authority, even if those are not public. It is interesting to note that David Cameron acknowledges that the UK business community would be opposed to a public registry unless other countries also conformed to that standard, but in the meantime, a registry supervised by a regulator, would be a good step in the right direction..
While Deputy Tadier continues to criticise Jersey, it should be noted that at present, Jersey, the Isle of Man and Guernsey each have a register of beneficial ownerships regulated by their respective Financial Services Commissions, and with firm requirements to check the authenticity of the ultimate beneficial owners of companies - customer due diligence, CDD, and apply a risk rating to them, as well as reporting any suspicious transactions.
For all David Cameron's rhetoric, the UK does not have this. It has no regulated central registry of beneficial ownerships. Cameron has pledged that this will be forthcoming, although since then, he has been hedging about whether it is initially made public or not. So in terms of requirements, the UK has a certain amount of catching up to do.
At the moment, Company A in the Jersey could be owned by an onshore parent, say Company B, where the identity of that company's parent may well be a complete mystery. There is no central registry of beneficial owners in the UK, and no requirements for due diligence.
The situation is even worse in the USA. There is no central registry of beneficial ownerships under State regulatory authorities. As the Financial Times notes "Companies registered in Delaware do not pay income tax there unless they have operations in the state. The disclosure rules when setting up a corporation or partnership - which costs anywhere from $180,000 to $75 per year - are simple, with the main constraint being the provision of a "natural person" to be the contact for that entity in case law enforcement officials come knocking on the door."
Recently, 19 former prosecutors and activists sent President Obama a letter urging greater transparency. They wanted disclosure of beneficial ownerships of these corporations which the prosecutors say are ways for "corrupt politicians, tax evaders and organized criminals to hide and launder stolen money."
But this is a long term problem. Back around 2000, Senator Carl Levin of Michigan first proposed legislation for Congress which would require states to disclose beneficial owners of corporations set up in their state. It has come back, and has failed three times since 2000.
Unlike Jersey, where suspicious transactions have to be reported to the authorities, and a central register of beneficial owners is kept, an Immigration and Customs Enforcement investigation in the USA was hampered in tracking some 800 dummy corporations - incorporated in the USA - and for which it suspected there were hundreds of millions of dollars of suspect money. The reason? The states where the corporations were registered had no requirement for owners to be identified. As a report notes:
"Reports were offered showing $14 billion to $18 billion of suspicious transactions going through U.S. shell corporations. The U.S. Department of Justice has fielded thousands of requests from our international partners for information on who owns corporations suspected in money laundering and other fraud. We cannot help them because we don't know who owns thousands of these corporations set up in the U.S."
Automatic exchange of information sounds like a good idea, and is being heavily promoted by David Cameron, but it falls down when confronted with shell companies formed in states like Delaware or Nevada.
Banks in the United States cannot at present even provide the kind of data the United States asks of Swiss Banks, because there is no legislative requirement to collect that information. And there is no way you can exchange information on a Delaware holding company if you cannot say who the beneficial owners are.
Unless the bigger players like the US can come on board with the drive towards a beneficial owner registry, all the dodgy money will migrate there, as indeed much already has. To date, the US government has struggled to pass any measures through Congress, and the omens are not good for the future.
There's a wonderful exchange in Yes Prime Minister
Hacker: We must fight for the weak against the strong.
Sir Humphrey: Then send troops to Afghanistan to fight the Russians.
Hacker: The Russians are too strong.
Sir Humphrey: What was that about law and justice?
I'm reminded of this when I hear David Cameron "summoning" the Crown Dependencies, and in part asking for something they already have, and the UK does not - a registry of beneficial ownerships. Of course it is terribly easy to summon small Islands to the Conference table and sound off about transparency, but what about America? I can imagine a fly on the wall might hear this:
Cameron: We must demand transparency and a register of beneficial ownership, and force it through. We must have fair taxation.
Cabinet Secretary: Then tell President Obama.
Cameron: The Americans won't take any notice of me.
Cabinet Secretary: What was that about fair taxation?
As the Guardian noted:
"Cameron wanted a couple of other G8 leaders to join him in pressing for public registries, but in the end none did so. All the G8 would agree to was that "some basic company information should be publicly accessible".
"Who, therefore is to blame for the summit's lack of real progress? Clearly, the G8 countries that put up strong resistance to change need to be named and shamed. This list includes the United States, where the tiny state of Delaware is the tax haven of choice for shell companies."
And Gavin Hayman noted:
"The credibility of this depends on the ability of the White House to advance legislation," said Hayman said. "The U.S. has promised this kind of thing before ... and not a lot happened."

Voting Rules and Collective Responsibilty

Dr  Jonathan Renouf pointed me to some useful background comparison stuff on the the Isle of Man government code of conduct  

He comments that:
"It deals more with what is forbidden than what is allowed (ie ministers must respect collective responsibility). They draw a very clear line around the Council of Ministers, which only includes Ministers, not their assistants. In fact, they don't call their assistant ministers "assistants", they are called departmental members, but they are to all intents and purposes what we would call AM's. They are excluded from collective responsibility with the exception that they must support their own minister."
He also points out that in the current set-up, Ministers themselves have on occasion voted against the Council of Ministers. That's certainly true, and Senator Ian Le Marquand did vote against the Council of Ministers on a rise in GST to 5%, honouring his manifesto commitment.
But Senator Sarah Ferguson thinks this is uncommon behaviour. The normative behaviour is for the Council of Ministers and Assistant Ministers to vote more or less in unison. She asks: "And do you really think that most Ministers will not select Assistant Ministers who do not agree with them? Or that Assistant Ministers who want promotion will not vote with their Ministers? Look at the voting records."
Again, a case in point is Deputy John Le Fondre, who did not agree with his Minister, Senator Philip Ozouf, and was removed, and another States Member appointed in his place. The Minister, after all, does have the power to "hire and fire" their subordinates.
My concern is that if there is a move to Collective Responsibility, which is certainly the way the Chief Minister wants to go, that the same safeguards that are in the Isle of Man would not be in place in Jersey. The Troy Rule, after all, was brought in by a backbencher, not by the chief architect of the Clothier reforms, Pierre Horsfall, who somehow overlooked that (along with much else of Clothier)!
The other factor which alters the dynamic is pay. If Ministers are paid more than ordinary backbenchers, or even Assistant Ministers, then there is an increased incentive for not voting against the Council of Ministers if you want promotion.
Those, as Dr Renouf points out, are hypothetical musings, and I agree that we should not pre-empt matters, but it is interesting that while Clothier managed to include what became the Troy rule in his recommendations, that there is no real consideration of this in the Electoral Commission's recommendations.
Instead this is what they have to say on the matter, after discussing the Troy rule:
None of this, however, falls within the terms of reference of the Commission. It would be for the States to consider in due course, if our recommendations were accepted, whether the "Troy" rule should be adapted or abolished having regard to the smaller number of members of the States Assembly. If the "Troy" rule were retained, it would be necessary to reduce the number of Ministers and Assistant Ministers to 18 so that the differential with the 24 non-executive members could be maintained.
We record that we have seen the draft interim proposals of the sub-committee appointed by the PPC to consider the machinery of government. There is nothing in those draft proposals that has caused us to revise our interim recommendation as to the number of members of the States Assembly.
In other words, unlike Clothier they do not consider it part of their remit to comment on the future of the Troy rule, and what the States should do. Clothier was forceful, but the Commission essentially passes the buck to the sub-committee considering the machinery of government. Those draft proposals are not, as far as I am aware, in the public domain, so we are in fact having to decide on the basis of  incomplete information. It would be helpful if Dr Renouf perhaps have some indication of what the sub-committee's drafts look like.
The review of the machinery of government went to public consultation, and I made a submission, as did Mark Boleat. Our submissions both agreed on the key question which relates to the Troy rule:
He wrote:
Should the Executive continue to be forced to seek consensus by being outnumbered in the States?
Yes; this is a normal part of the democratic process, but it does require collective responsibility to operate, otherwise there is a danger of paralysis.
And I wrote:
 Should the Executive continue to be forced to seek consensus by being outnumbered in the States?
This is a good safeguard against the abuse of power, and in fact, I'm not sure of any occasion where the Executive has brought a proposition which has fallen through being outnumbered. On several occasions, however, Terry Le Sueur's Council of Ministers took a swift recess to discuss and change their opinions on propositions to avoid being outnumbered, which was no bad thing.
While there are no political parties, there are political alignments (clearly visible in voting patterns), and these usually work in favour of the executive anyway. Reducing the need for consensus would therefore not be a wise move.
The Review of the Machinery of Government is one of those shadowy consultations, which is not nearly as high profile as the Electoral Commission, and has been going alongside another consultation on the Jersey Election Laws (which may look at election deposits). But as can be seen, it clearly dovetails with the work of the Electoral Commission,  and the terms of reference should have looked at this in more detail, because it is significant with respect to this question.
The unwillingness of the Commission to share the information about that question asked in the Machinery of Government Review means that we have to speculate about how a smaller States might work. They may have seen the draft report, but for the rest of us mortals, it is a matter of speculations in the dark.  "We've seen the draft,. " with the implication "and you can trust us" is simply not good enough. It's a lazy way opting out.
So in answer to the question asked:  "why let the evidence get in the way, when there's a pre-formed opinion waiting to be deployed"?, we have to speculate because only the Commission is privy to information which would help us see how the Machinery of Government may alter. There is a lack of evidence, which perhaps Dr Renouf could rectify? I don't take quite the cynical line of Sarah Ferguson, although one should consider worst-case scenarios, but I would welcome more information so that I could make a better informed decision.