The Government of the Cayman Islands has this week gazetted a
bill to repeal the statute that has frequently – and
mistakenly – been described as Cayman's banking secrecy
law. The Confidential Relationships (Preservation) Law was
originally enacted in the 1970s, when Cayman as a financial centre
was in its infancy. In essence, all it does is to overlay criminal
penalties on disclosures of confidential information that in most
cases would be actionable by civil proceedings in any event.
However, in the 40 years of the Law's existence, no-one has
ever been prosecuted, and the only part of the Law that is commonly
used is section 4, which enables a person who intends or is being
required to disclose confidential information in evidence in
proceedings (whether in Cayman or elsewhere) to get the approval of
the Court to so doing.
The Bill just gazetted is called the Confidential Information
Disclosure Bill, 2016. By repealing the Confidential Relationships
(Preservation) Law it will essentially return the whole area of
liability for breach of confidence to the realm of the common law
and rules of equity. But importantly, it retains the mechanism for
seeking court approval for disclosure. This is a distinct feature
of Cayman Islands law that does not exist in most other common law
jurisdictions. Although the common law defences to an action for
breach of confidence, such as acting under compulsion of law, are
well established, they do not cover all the circumstances in which
disclosure may be appropriate or necessary in practice. For
example, where the obligation to disclose arises under foreign law,
rather than domestic law, the holder of the information may not be
protected by the common law 'compulsion of law' defence. In
particular if it is a business with operations in the foreign
country imposing the requirement it might, absent such a mechanism,
find itself in a difficult position. Moreover, there are situations
where a person intends to make disclosure (e.g. to protect his own
interests) but is not actually being compelled to do so. A court
direction authorising disclosure will thus provide protection that
would not be available otherwise.
Even under the current law, disclosure in numerous contexts is
already expressly permitted, including responding to statutory
notices from the Cayman Islands financial services regulator, both
for its own purposes and for onward transmission to overseas
regulators; providing information to the police investigating
offences and under mechanisms for international co-operation in
criminal matters; producing information to the Tax Information
Authority under a notice issued on the request of an overseas tax
authority; and filing suspicious activity reports or reports under
anti-corruption legislation. The Bill preserves and enumerates
these and various other circumstances in which disclosure is
specifically allowed, although for the most part they are cases
where the well-established common law defences to disclosure would
apply. Given the removal of the criminal component of the regime,
this and certain other aspects of the Bill are arguably unnecessary
and run the risk of creating uncertainty by replicating matters
that are already sufficiently dealt with by the common law, without
seeking to codify it fully. It is hoped that these issues will be
resolved in the legislative process.
The new Bill also introduces a 'whistle-blower' defence
for disclosures made in good faith evidencing wrongdoing, a serious
threat to the life, health or safety of a person or a serious
threat to the environment. This is consistent with a more general
move towards protecting public interest disclosures, but would
arguably be better addressed, in a more developed form, in the
context of specific whistle-blower legislation which is currently
The Government has stated its intention that the Bill should
pass into law by September 2016.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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