Channel Islands: working more closely together, but the rivalry remains

The relationship between Jersey and Guernsey has been described as being like that of a pair of rivalrous siblings. Some say the animosity dates back to the English Civil War of 1642 – 1651, when the two islands, separated by 25 miles of water, were on opposite sides.

Here, Jersey resident Peter Body, who was born in Guernsey, looks at how they’re getting along – and whether they are prepared to work together as the post-Brexit European landscape is hammered out.

There is one subject on the minds of Channel Islanders in both Jersey and Guernsey at the moment. And that’s rubbish.

The two tiny, crowded islands – which together total no more than 75 square miles, tucked into France’s Bay of St Malo – have a problem disposing of the waste produced by their combined population of 165,000 people, plus the nearly 500,000 tourists who visit annually.

The smaller island of Guernsey has completely run out of landfill sites. Jersey, also lacking landfill sites, invested £110m in a modern energy-from-waste plant, and had expected that the cost would be partly covered by revenue earned by burning waste from Guernsey, just 25 miles away.

But despite the two governments’ pledges to work more closely together, co-operating on waste disposal is, it seems, a step too far.

Guernsey now plans to ship its waste a thousand miles to Sweden, rather than use its neighbour’s facilities. Economics appears to have trumped inter-island co-operation, and Guernsey will be using a much bigger, more efficient plant in Scandinavia, even if transporting the waste all those sea miles is going to burn up lots of fossil fuel in the process.

Back in the Bay of St Malo, meanwhile, Guernsey’s waste disposal decision has put into fresh context a treasured conviction of some on both islands, that Jersey and Guernsey might at last be coming closer together – after centuries of rivalry and suspicion – and that one day soon, they would come together at last, in some kind of political confederation.

As the dispute over Guernsey’s rubbish suggests, if such a day indeed lies ahead, it is now clear that it may not happen for some time to come.

This is in spite of the fact that in a complex, sometimes hostile world, it might be better to present a united front, like some kind of North Sea version of Indonesia, rather than as a collection of fiercely individualistic little islands, of which Jersey and Guernsey are simply the largest. (The others include Alderney, Sark, Herm, and a curious fortress “islet” known as Breqhou, which is inhabited by the billionaire Barclay twins and their extensive staff.)

Some progress

To be sure, there has been progress in recent years. The islands already share an underwater electricity cable (with France); an advisory office in Brussels (although they don’t share one in London or in any other foreign capitals); a competition regulator; a data protection registrar; an aviation regulator; and, since last November, a financial ombudsman.

The Channel Islands Securities Exchange, which is looking to expand its Islamic finance listings, is located in Guernsey, but it also has a Jersey office, and in conversation its executives go out of their way to stress that it is a Channel Islands institution, not a Guernsey one.

So the islands have shown that they will work together, under certain circumstances. But so strong is their sense of self destiny – as well as, many say, their inter-island rivalry or mistrust, which is widely said to date back to the English Civil War, when Jersey and Guernsey were on opposite sides – that enthusiasm seems to be lacking when it comes to working together to tackle some of the big issues facing them both.

Including, clearly, waste disposal.

Brexit

The latest test of Jersey and Guernsey’s ability to work together emerged earlier this year, when the UK voted by a narrow margin to leave the European Union, and is likely to run and run.

Both islands are inextricably linked to the EU as Crown Dependencies of the UK, as well as through their own independent arrangements. So Brexit might be seen as representing a new and, some say, potentially major threat to their economies, as well as a compelling new reason to join forces.

Although it’s too soon to know for sure how well or how closely they will work together in the post-Brexit struggles that are to come, the governments have vowed to work together.

In June, in fact, the chief ministers of both islands, together with the chief minister for the Isle of Man, wrote jointly to then-still-UK prime minister David Cameron and asked him to “retain the status quo” with respect to the EU.

Yet at the same time, the two islands have also worked up their own, different Brexit strategy documents, rather than opting for a single one.

lyndon-trott-old photo, cropped

Lyndon Trott, pictured, Guernsey’s deputy chief minister and chairman of Guernsey Finance, says that since the islands never were themselves part of the EU, despite being the Crown Dependencies of an EU member, they expect nothing more or less than to continue to be outside of the EU, as they have been up until now, no matter how the UK’s relationship with Europe develops, post-Brexit.

“Over the years, Guernsey has successfully negotiated its own access to EU financial markets, as a non-EU jurisdiction,” he said.

“The UK’s exit of the EU [therefore] will not create any significant changes for Guernsey.”

This, he added, means that at a time of uncertainty for the UK, Guernsey remains “a stable and secure place to do business”.

Threats nothing new after 800 years

Historically at least, tension and uncertainty are nothing new to the folk on Jersey, Guernsey and the other Channel Islands (most of which are legally considered to be part of the “Bailiwick” of Guernsey).

That’s because the past 800 years have seen numerous invasions sweeping across these islands, the last one having occurred just 75 years ago, during World War II.

Each time, the islands have adapted, and got back to running their farms and businesses and fishing the local waters as soon as they were able to.

Today, thanks in part to their unique constitutional position and other factors, the two islands sit high on the global personal wealth league tables, with per capita income in Jersey, according to States of Jersey data, at around £38,800 at the moment, and Guernsey close behind, States of Guernsey data shows, at £37,000. This compares to a UK per capita GDP of just £24,000.

Possible UK break?

One concern the islanders do have with respect to Brexit, which is also apparently shared by certain influential politicians in Scotland, is the possibility that they might potentially be pushed to break with the UK, if the outcome of leaving the EU proves unfavourable, and the UK government can’t keep its promise of protecting the islands’ best interests.

Guernsey’s Chief Minister Gavin St Pier has pointed out that the UK has a duty to look after both Jersey and Guernsey, even though neither island has a vote in the House of Commons nor had one in the recent referendum.

Both islands also boast about being completely independent domestically, and although the UK still technically looks after their defence and international relations, and they still use the British currency, they are increasingly going their separate ways on foreign issues as well.   Geoff Cook, Jersey Finance cropped

“Fundamentally, Jersey’s constitutional relationship with the UK will not be affected by the UK’s decision to leave the EU, and we remain convinced that the UK’s long-term position as a financial services powerhouse will continue,” said Jersey Finance chief executive Geoff Cook, pictured. 

“In addition, Jersey is already outside of the EU itself, and maintains strong access to European markets through its broad and robust third country agreements, [which] also remain unaffected [by the UK’s decision to leave the EU].”

 

‘Peculiar’ of the Crown

This favourable political anachronism stems from the islands’ position as a “peculiar” of the Crown, an appropriate adjective to describe their constitution going back to 1066, when they were part of the Duchy of Normandy.

A proud boast of some older island families is that their ancestors are said to have accompanied William, Duke of Normandy when he invaded England, won the Battle of Hastings, and became King of England. The islands remained loyal to the English monarch even after King John lost his Normandy possessions in 1204, and to this day the Loyal Toast at formal dinners in the islands is to “The Queen – Our Duke”.

This is not just an interesting historical fact, however; it’s also the basis for the continuing economic success of the islands. English monarchs over the centuries rewarded the islands’ loyalty with certain freedoms, including the crucial right to set their own taxes, which they have managed to keep very low.

Even today this helps the Channel Islands to distinguish themselves from other small islands (and larger countries) that have more recently set themselves up as tax havens.

So if Jersey and Guernsey are in fact tax havens – which the islanders flatly deny, insisting instead that they are merely tax-neutral for foreign residents, and low tax for business – then they are 800-year-old tax havens.

In fact, both islands argue that when it comes to most measures by which jurisdictions are judged, they come out better, more regulated and less capable of being used to hide or launder money than many of the larger, OECD-member countries, including the US.

Jersey in particular points to comments by an Australian professor, Jason Sharman, who recently cited a major “mystery shopper” research exercise, carried out to test the willingness of 7,000 corporate services providers (CSPs) in various offshore financial services jurisdictions, as well as OECD member states, to set up a company without any paperwork.

The exercise found that the Jersey CSPs – as well as those in the Cayman Islands, as it happened – always insisted on doing identity checks on those seeking to set up companies within their borders, thus earning their jurisdictions a perfect (100%) score. This, it turned out, was far better than the scores awarded to certain G20 countries that are typically among those who complain the loudest about unfair competition from tax havens. (Guernsey was apparently not included in the exercise, but the UK came in close to the bottom.)

Prospering despite adversity

Constant tax haven references would be unhelpful in any event, but like many other nations around the world, both Jersey and Guernsey are still also having to deal with the lingering effects of the recent global financial downturn. That their economies at the moment remain robust, if not exactly buoyant (“stable” is a common description), is, some say, almost entirely due to the success of their financial services industries, which directly account for 45% of national income in Jersey and 34% in Guernsey.

Both islands are actively seeking new markets overseas, though again, they are doing so independently, rather than together.

(This is even though it is said that some foreigners new to the geography of the Channel Islands, and to the English language, struggle to differentiate “Jersey” from “Guernsey”, and even don’t always realise immediately that they are two separate jurisdictions, so similar do the two names sound.)

Guernsey Finance, for example, the promotional arm of Guernsey’s financial services industry, opened a representative office in Hong Kong in February, kicking it off with a series of events attended by Guernsey officials and the UK’s consul general to Hong Kong, Caroline Wilson. The organisation has another office, in Shanghai, which opened in 2008.

For its part, Jersey Finance has marketing outposts in London, Hong Kong, Shanghai, Dubai, New Delhi and Mumbai, most of which it’s opened in the past five years.

As Guernsey’s rubbish sails off into the sunset, bound for Sweden, then, it seems that the quirky, slightly competitive relationship between Jersey and Guernsey, which surfaces whenever there’s mention of the other island, is destined to continue.

And so too do the vows to continue looking to work more closely together.

Said Lyndon Trott, Guernsey’s deputy chief minister and chairman of Guernsey Finance: “Guernsey and Jersey [already] work closely together on many matters…and the States of Guernsey will continue to explore new ways to achieve efficiency savings, and promote greater opportunities for trade between the islands.”

ABOUT THE AUTHOR
Helen Burggraf
Helen Burggraf is the editor of International Investment. A US-trained journalist, she has worked in Rome, New York City and London, covering everything from the fashion and retailing industries to the global drinking water and water-treatment sector, private equity, and most recently, the international cross-border financial services/advice industry.

Read more from Helen Burggraf

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