No change for crown dependencies’ financial services sectors

Added 27th June 2016

The financial services sectors of Jersey, Guernsey, and the Isle of Man should see little, if any, change following the UK’s decision to leave the European Union.

No change for crown dependencies’ financial services sectors

The crown dependencies occupy a relatively unique political and economic position with regard to both the UK and the EU.

The dependencies’ legal and trading relationship with Europe is defined by Protocol Three of the UK’s 1972 Treaty of Accession.

Under the agreement the islands sit outside the EU for most purposes; neither contributing funds to nor receiving funds from the currently 28 member bloc.

Third country status

The islands are part of the customs union and within the single market for the purposes of trade in goods, but not services and as such are treated as ‘third countries’ in terms of financial services regulation.

Passporting, the means by which financial services companies are authorised to provide their services across Europe, does not apply to ‘third countries’.

Therefore the crown dependencies have had to develop their own relationships with European countries to facilitate and offer cross-border financial services.

Geoff Cook, chief executive of Jersey Finance, told International Adviser on Friday: “The position that the UK will have to get into over the next two years or so, we are already in. We have already had a bilateral dialogue with all European countries over the last decade and longer about our relationship to Europe.”

Negotiations and forward planning

The governments of Jersey, Guernsey, and the Isle of Man have all confirmed that they are in contact with the UK with regard to safeguarding the crown dependencies’ interests as it breaks away from the EU.

Ian Gorst, chief minister of Jersey, on Friday advised: “In the coming days, I will write to the prime minister to set out Jersey’s position more formally, and will continue to work closely with the UK government in the weeks and months ahead to ensure that we are kept informed of developments and to safeguard Jersey’s interests as negotiations progress.”

In March, Gorst told IA: “We have made it clear we want to maintain our existing relationships, whatever the British public decides, and we will continue to do so.”

Jersey has had an office in Brussels for a number of years.

Still a third country

The government of Guernsey announced that a policy letter will be published shortly to seek a mandate from the States of Deliberation to negotiate with the UK and protect the interests of the islands.

The statement advised that Guernsey was a third country to the EU before the vote, it remains a third country to the EU now, and it will remain a third country and outside the EU when the UK eventually leaves the union.

Guernsey’s negotiations will aim to:

  • protect Guernsey’s interest in the UK exit agreement with the EU;
  • replace Protocol Three in the new UK/EU relationship;
  • safeguard the longstanding constitutional relationship with the UK; and
  • seek new opportunities as the UK establishes new trading relationships with the rest of the world.

Financial services not included

An interim report, released by the Isle of Man government a week before the referendum, advised that a vote by the UK to leave the EU would prompt the establishment of a high-level government working group, to undertake detailed technical discussions regarding the withdrawal agreement.

Work on this would begin immediately following a vote to leave, the report stated.

Speaking on Manx Radio on Saturday, Isle of Man chief minister Allan Bell said that, while there was concern about the IoM’s future trading agreement with the second largest trading bloc in the world, “financial services will always remain outside of that agreement”.

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About Author

Kirsten Hastings

Senior Reporter

Kirsten is a senior reporter for International Adviser, covering global news stories about the financial services industry. She joined Last Word Media in October 2015 after two years working as a reporter covering the staffing and recruitment industry. Kirsten has a Masters in Financial Journalism from the University of Stirling. 

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