Politics and Government
New governor sworn in
Helen Kilpatrick was sworn in as the Cayman Islands’ 12th governor at a ceremony at the Legislative Assembly on Friday, September 9. In the Cayman Islands, the U.K.-appointed governor has ultimate responsibility for internal and external security.
In a speech outlining her objectives and priorities, Kilpatrick said her vision as governor was one of partnership and cooperation. She welcomed the commitments made by Cayman at the recent Group of Eight countries meeting in London to boost transparency in its financial services sector and added she felt Cayman’s true story wasn’t quite understood properly.
“I look forward to helping drive forward the global reputation of Cayman to one of a dynamic, well-regulated financial services center,” she said.
She added that she supported steps being taken to improve the efficiency and effectiveness of the public administration, including a recently announced plan by the People’s Progressive Movement government to proceed with Standards in Public Life legislation.
The importance of good governance also needed to extend to public finances Kilpatrick said.
“Of course, a successful economy needs to have strong roots in good governance and the careful management of public finances. Some have already noted my background in this area, but I believe that effective stewardship of public money is a shared responsibility – from the members of this Assembly to those delivering front-line services for the residents of, and visitors to, the Cayman Islands.”
Kilpatrick, an accountant, has never served in a post with the U.K. Foreign and Commonwealth Office. Instead she held a leadership role in the U.K.’s Home Office.
The new governor also touched on the subject of the natural environment, which she acknowledged was the responsibility of the elected government, saying she was committed to working with government and civil society to “ensure that these assets are managed and protected in a manner that befits their incredible value.”
Mrs. Kilpatrick, the first female governor of the Cayman Islands, said she also planned to champion the rights of women and combat discrimination in all forms.
Cayman’s most recent proposed amendments to the territory’s Immigration Law will allow some non-Caymanian workers to stay longer on work permits but will make it more difficult for them to obtain permanent residence.
The changes proposed in the Immigration [Amendment][No. 2] Bill, 2013, are to replace the current seven-year term limit on non-Caymanian workers’ residence, often referred to as the “rollover policy.” Instead, a nine-year term limit is being proposed.
After the legislation takes effect, anyone who is able to reside continuously in Cayman for eight years will be allowed to apply for permanent residence – the right to live in the territory for the rest of their lives.
However, the requirements for being granted permanent residence will change. A review of the current immigration law focused on redefining criteria for granting permanent residence to align with government’s “economic, social and cultural objectives,” will inform the new permanent residence rating system. Fees for permanent residence applications will be increased from $300 to $1,000 if the new bill is approved.
“The aim is to ensure persons granted permanent residence are drawn from a diverse cross-section of our society and are also assets to the community,” Ministry of Home Affairs Chief Officer Eric Bush said in August.
“The revised criteria will also take into account the impact of the removal of the initial filter afforded by the key employee feature of the term limit process.”
As a result, it will be more difficult under the new immigration system to earn permanent residence designations. The specific points system used to designate permanent residence will be contained in regulations to the Immigration Law if the amendment bill gains passage in the LA.
The key employee designation now required to stay in Cayman beyond the current seven-year term limit will be eliminated. Under the existing system, local businesses essentially make the first decision on who gets to stay and who must leave when they choose workers to designate as key employees.
The difference under the proposed system is that government will be the sole arbiter in the decision, once a permanent residence application is received.
The Cayman Islands government projects to end its budget year next June with a CI$100.3 million operating surplus
According to budget numbers presented by Finance Minister Marco Archer, government’s operating revenues will top CI$644 million, while expenditures will fall just below $518 million for the year through June 30, 2014.
Revenues are expected to increase by 4 percent over 2012/13, while expenditures are expected to be about $8 million lower than they were during the last budget year.
When subtracting $31.4 million the government will have to pay to meet interest costs on its substantial debts and adding a projected $5 million surplus earned from the operation of government-owned companies and statutory authorities, the government projects an operating surplus of $100.3 million.
Core government debts were expected to fall just below CI$549 million by June 30, 2014, including a $26.3 million principle debt payment made over the course of the budget.
Meanwhile, government will continue the “no borrowing” stance imposed on the Cayman Islands by the United Kingdom since 2011/12. The Cayman Islands government committed to the United Kingdom that it will not seek any long-term borrowing from the current fiscal year through the end of the 2016/17 budget, extending the existing borrowing ban for another year.
The new finance minister said there were six large “drivers” of government spending for the 2013/14 budget plan, including educational and workplace training initiatives; monies spent on the “unemployment issue;” rising health care costs; rising costs of combating crime; increased social services cost; and the cost of addressing certain requirements within the Cayman Islands 2009 Constitution Order.
The one new revenue measure proposed during 2013/14 is the implementation of a licensing and registration fee for hedge fund directors whose investment funds are registered in the Cayman Islands. Archer said that revenue stream was delayed during the last government budget to allow “for proper consultation with the financial services industry.”
Mixed survey results on regulating directors
A survey commissioned by the Cayman Islands Monetary Authority showed that investors overwhelmingly believe that directors in the mutual funds sector do not have enough time to dedicate themselves fully to each board.
About half of the survey respondents believe that a limit on the number of directorships held by individual directors would benefit the sector. The number is higher, about 60 percent, among hedge fund managers and investors.
The survey on corporate governance standards, practices and the regulatory framework related to the Cayman Islands mutual funds sector, confirmed a call for greater transparency of service providers and the clarification of a director’s fiduciary duties.
In January, the monetary authority sent a consultation paper to various financial services bodies in Cayman proposing to develop a searchable, public database of licensed and registered entities to facilitate the due diligence process for investors.
In its consultation paper, the monetary authority argued that limiting the number of directorships a director can hold may be beneficial, but it would be challenging to design.
Ensuring that directors had sufficient time to apply themselves to every board they represent is a concern for a large percentage of those polled, including directors themselves.
The majority of respondents who argue that a limit would be beneficial, say it should be based on manager relationships rather than the number of directorships held. Such a limit would ensure sufficient director capacity, enhance the reputation of the sector and improve corporate governance practices.
The majority of service providers, however, do not feel that a limit would benefit the sector.
A cap on the number of directorships would increase fees and lead to inexperienced directors entering the sector, according to a majority of hedge fund managers, investors and directors.
While investors are almost unanimously in favor of a requirement for directors to divulge the number of directorships they hold, only half of hedge fund managers and directors would support such a measure – and a quarter is against such a proposal.
A majority of investors stated that a CIMA-managed database would be best suited to inform stakeholders and about two thirds of all respondents, who wanted more transparency on directorships, preferred such a database.
But a smaller, yet significant, number said other means of communicating the information such as the offering memorandum, upon request or in an information statement would be acceptable.
Grand Court quashes tax information exchange
The Cayman Islands Grand Court quashed a decision by the Tax Information Authority to provide information to the Australian Taxation Office in response to four requests made under a tax information exchange agreement between Cayman and Australia.
While the judgment acknowledged that the authority owed a duty to assist the Australian authorities, it had to ensure that the requests were in compliance with the Tax Information Authority Law and the tax information exchange agreement and did not infringe the rights of those subject to the request.
In a decision dated Sept. 13, the Grand Court ruled that the Cayman Islands Tax Information Authority failed to ensure that the information sought by the Australian Taxation Office only related to tax years and taxable periods after July 1, 2010, as stipulated by the tax information exchange agreement.
The Tax Information Authority also had no legal authority to give its consent for the use of the material in court proceedings without first applying to the Grand Court for directions.
In addition, the Tax Information Authority had failed to notify the companies subject to the tax information exchange request of “the jurisdiction making the request and the general nature of the information sought.” This is required by section 17 of the Tax Information Authority Law for cases that are not criminal or alleged criminal matters, provided the authority knows the whereabouts of the taxpayers concerned.
In the circumstances, producing the information infringed their rights to “a fair and public hearing” and their “rights to privacy” under the articles 7 and 9 of the Cayman Islands Bill of Rights, the judge ruled.
Justice Charles Quin directed Cayman’s Tax Information Authority to write to the Australian Taxation Office to formally revoke its consent that the information given could be used in court proceedings and confirm that the Australian Taxation Office would not divulge the content of the documents.
The court also directed the Tax Information Authority to demand from the Australian Taxation Office the immediate return of the documents and the destruction of the copies, as these had been unlawfully provided by the Cayman authority.