Guernsey: Why Guernsey Is What It Is

Last Updated: 29 June 1999

When Channel Islanders joined the army of Duke William in 1066, crossed the English Channel and conquered England, little did they realise what the result would be for their descendants. Rather than just being "Normans", their descendants would be forever "British".

For one and a half centuries England and Normandy were two countries ruled by the same person, who was at the same time King of England and Duke of Normandy. In 1204 the French king conquered continental Normandy but left the Channel Islands under the control of the English king. As the English had substantial territories remaining in France, such as in Bordeaux, the islands were heavily fortified as essential staging posts for naval and military operations.

As a reward for their loyalty, the islanders were given many benefits by their Duke, which were enshrined in Royal Charters. Benefits included freedom from English taxation and other laws applying to England. The islands retained their Norman heritage, their Norman laws and their internal self- government. This beneficial constitutional basis has been built upon through successive centuries and today the islands find themselves in a unique constitutional position as self-governing dependencies of the British Crown, with their own autonomous parliaments making their own laws.

Their position is very different from that of British colonies, where British people have colonised lands in other parts of the world and have taken as their authority for colonisation the consent of the British government and the Imperial parliament at Westminster. They are thus subject to the legislative power of Westminster. The former colonies, which are now independent dominions, such as Canada and Australia, have had their present status conferred upon them by the Westminster parliament.

The constitutional history of the Channel Islands is quite different. Normandy acquired England by conquest and thus the peoples south of the English Channel were not subject to the dictates of the Westminster parliament.

Through the centuries democratic institutions have developed in Britain whereby the king ceded some of his powers to the people. These people were the people of England, Scotland, Wales and Ireland (now only Northern Ireland). The Channel Islanders were a different "people" who were not part of this arrangement.

Until the UK entered the European Union in 1973 the British parliament was sovereign. Now it is subject to the supremacy of the European institutions. The Channel Islands do not, however, form part of the European Union and so they are not subject to directives from Brussels in the same way as they apply to the United Kingdom. There are some minor exceptions, which the islands have agreed to, such as agricultural subsidies and import duties on goods from third countries. The islands therefore have much more freedom internationally than the UK.

The British Crown has the power, by constitutional convention, to legislate for the islands only in the event of the breakdown of good government. As the Islands have had more stable government than the UK itself through the centuries, the use of the convention is very remote.

The people of the islands have always been more conservative than the population of the United Kingdom. When socialism took root in Britain in the twentieth century it found little sympathy in the islands. The conservatism of the islanders has resulted in its present political and tax structure. The islanders have held and continue to hold traditional values of financial prudence. Even now the government of Guernsey refuses to borrow money to finance deficit budgets. This means that in the past there has not been government borrowing to finance expensive social initiatives and public projects. If the islands could not afford something from their current resources they would do without it. As a result of the lack of government borrowing there is no public debt and so no public loan repayments. We therefore need less money to fund public expenditure than similar communities elsewhere and so our tax rates are lower than they would otherwise be.

In the past because our tax rates were low, people from elsewhere came to Guernsey to take advantage of them. In that sense the island has been a "tax haven" for those from elsewhere, but it was never intended as a tax haven for local people. Taxes were raised to finance public expenditure, not to redistribute wealth.

The finance sector is undergirded by modern laws governing banking, companies, trusts and mutual funds. There is a strong infrastructure to support the sector, including Guernsey advocates, English solicitors, foreign lawyers, accountants, actuaries, bankers, fund managers and insurance managers.

The island is proud of its democratic system of government, with 55 members of the States of Guernsey (the parliament) elected by public franchise and its independent judicial system. The Royal Court of Guernsey administers local laws. Appeals go to the Guernsey Court of Appeal and from there, on points of law only, to the Judicial Committee of the Privy Council in London. Appeals on human rights issues go to the European Court of Human Rights in Strasbourg.

The island has had a long and proud history of independence and financial prudence and intends it to stay that way in the future.

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.

This article also appears in the 'International Offshore and Financial Centres Handbook 1999/2000'. For further information about this highly informative guide to offshore centres, or to order your copy, please phone +44 (0) 207 820 7733 or send an email to iofch@mondaq.com

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