The law the legislators like to ignore.

Next week the States are to debate a proposition which has the potential to be up there in the top five worst pieces of legislation the States have adopted see:  Draft Taxation (Companies - Economic Substance). Like one of other pieces in my top 5 - the introduction of 0/10 - it is a response to 'defend ' the finance industry from external  actors.   As the Intro puts it the law provides the means by which commitments of the States of Jersey to address the concerns of the EU Code of Conduct Group (Business taxation) ("COCG") regarding economic substance are met.



I've no problem with them addressing that.  But it is the impact on quite legitimate business that really concerns me.  Like the 0/10  it the law of unintended consequences that the legislators are ignoring. I became aware of it when a few weeks ago an acquaintance who runs a perfectly legitimate non finance business told me he was preparing to wind up his company if this proposition were passsed as it stands.  (There are no amendments and no alternatives on the table as yet so it is all or nothing).


But it is worse than  that because it seems to be  built upon a fundamentally flawed concept too.


The intention , again quoting the  report of the proposition is to  deal with " The jurisdiction should not facilitate offshore structures or arrangements aimed at attracting profits which do not reflect real economic activity in the jurisdiction".  It should be obvious  there are three elements involved here - attracting profits, offshore structures and arrangements, and real economic activity in the jurisdiction.  The proposition only addresses the last item.  Profits are only mentioned twice - in the report, not the body of the proposed law. Offshore is similarly only mentioned once  - in the quote I gave above. 


As I read it, and I am certainly not alone in this, the proposed law applies to all Jersey companies, not just those that need to be addressed in the COCG objective.  Most established companies won't actually have any difficulty in passing the economic substance test, but some most definitely will.  There is a list in section 3 that identifies the relevant activites.  they include most finance activities of course, but also intellectual property holding business.  That's where my acquaintance is  caught.  It would equally cover software developers, playwrights, artists, authors, plant breedrs who retain breeders rights, patent holders etc etc.

There is  a sort of get out clause in the introduction.

A "high risk IP company” is a company which carries on an intellectual property holding business and –(a) the company
– (i) did not create the intellectual property in an intellectual property asset which it holds for the purposes of its business,
(ii) acquiredcthe intellectual property asset–(A) from a connected person, or
(B)in considerationfor funding research and development by another person situated in a country or territory other than Jersey; and
(iii) licences the intellectual property asset to one or more connected persons or otherwise generates income from the asset in consequence of activities (such as facilitating sale agreements) performed by foreign connected persons; or
(b) the company does not carry out research and development, branding or distribution as part of its Jersey core-income generating activities;




The part I would draw your attention to is the first bit of paragraph 5 . 

5 Requirement to meet economic substance test

(1)

Subject to paragraph(8), a resident company must satisfy the economic substance test in relation to any relevant activity carried on by it.

(2)

A resident company meets the economic substance test in relation to a

relevant activity if –

(a)

the company is directed and managed in Jersey in relation to that activity;

(b)

having regard to the level of relevant activity carried on in Jersey

–(i) there are an adequate number of employees in relation to that activity who are physically present in Jersey (whether or not employed by the resident company or by another entity and whether on temporary or long – term contracts),

(ii)

there is adequate expenditure incurred in Jersey, and

(iii)

there are adequate physical assets in Jersey;

(c)

the company conducts Jersey core-income generating activity; and

(d)

in the case of Jersey core-income generating activity carried out for

the relevant company by another entity, it is able to monitor and

control the carrying out of that activity by the other entity.

Anyone who has ever run a start up business, especially in software development or research will be laughing their heads off. Such entities start in one of two ways - the owners working  unpaid hours to develop product, or they get a large dollop of investment  cash  . 90% of the time it is the former.  And if you are developing software you are like playwrights and authors and artists producing intellectual property - something that is licensed rather than sold.  It is a shoe string operation usually there are no employees (directors are office holders that are not necessarily employees - if they are unpaid they cannot be!).   There' s no income initially in development, and of course much of what you need to buy , if anything, is likely to be software tools  not available locally.  Assets are minimal , possibly don't even belong to the business, but are the personal proporty of the owners.  Not much chance of meeting the economic substance test. 


Now if I can go back to the key error.  It arises in  the item quoted above 
i) did not create the intellectual property in an intellectual property asset which it holds for the purposes of its business.   That is always true!  For much the same reason companies cannot go to prison - they are legal structures.  A structure cannot create intellectual property.  You need a sentient being for that - almost always a human, put I guess art created by elephants or dogs might qualify.  It is the reason anyone who works in research or software development will always find their employment conditions  stipulate they assign their employer all rights to intellectual property created. It is troubling that the law seem to be so  ignirant of the realities of  the creation of intellectual property.


The penalties for falling foul of this all encompassing law are steep if you are a minnow start up, potentially £100,000 pounds.  Peanuts to the biggest players who may  make  huge gains from doing exactly what the COCG want to stop, but disasterous for small legitimate businesses.  There is a form of appeal set out in articles 12/13.  First to the Comptroller (the one who raises the penalties and presumably whose department benefits from the fines !) .  After that to a Commission.

4)A Commission of Appeal shall be constituted for the purpose of hearing an appeal under Article12 as it would be constituted  from the Commissioners of Appeal appointed under Article 10(1) of the 1961 Law for the purpose of hearing appeals under the 1961 Law.

That's all well and good, but what is this Law - it isn't named or titled. I am guessing it is the 1961 Income Tax (Jersey) Law.  That Law doesn't give commissioners  powers over fines, only assessments of income tax. Just because it happens to be administered by the same office doesn't give rise to addiitonal powers.  And I doubt thos commssioners are any better qualified than the Comptroller to know what is an appropriate number of employees for an IP busienss, or indeed the necessary local expenditure to be of economic substance.


Hopefully you will have already identified the other open goal in this whole charade.  This proposed law explicitly and only refers to companies.  There is no provision for sole traders, partnerships, trusts or foundations that undertake the exact same activities.  It is quite implausible that the legal advisors to the States (the AG or SG) did not see this.  Of course those other mechanisms are excellent business for some  parts of Jersey' legal fraternity.  What a strange and quite unfathomable coincidence !!

A lost decade

Ten years ago we had an election in Jersey.  The senatorial contest was notable for having  three declared groupings - JDA, TimeForChange and Jersey2020.  I was a candidate alongside Daniel Wimberley and Nick Palmer as the 2020 group.  It felt as though some organised politics might actually arise from  that.  It was also of course run in the backdrop of revelations and investigations concerning child abuse in the care system. 


The saddest thing for me is just how much those topics we were raising then  are still relevant today, many more so. And how so little has been achieved by the States since on those issues. Despite the intervening  Committee of Inquiry  we still have  repeated reports of various parts of the care system not adequate, needing  change and failing  children.


It will be hard for some to credit that back then we didn't have  an energy policy and there was no position on climate change. Energy if it was considered was a matter of the Treasury Minister as  shareholder  dropping round for a cup of coffee to Jersey Electricity and informing the chief exec what level of dividend they expected to receive. The difference that election was the revelations concerning the  new incinerator , since it does produce a spot of electricty  from the burned waste.


It took the  formation of the JCAN on the back of our campaigning that election, and a few more years  to finally get an energy policy and a commitment on climate change.  In classic Jersey fashion that was based on two decades old material - the Kyoto protocol.  And it hasn't been updated since despite the rest of  the world (arguably absenting the USA)  having agreed the more ambitious Paris agreement.


An area I was almost alone in raising was food security, waste and the role of allotments.  At that time the only proper site was at Grouville and that only because the land had been in the same hands since before the planning law was introduced and hence not controlled by it.  We do now have a number of other allotment sites , but that is much more due to the work of JALGA than any assistance from the States.  And all that before food banks became a big thing in the UK  and almost a decade before Brexit talks of needing food and medicine stockpiles.   It is a forgotten truth in politics that the best time to tackle a problem is when most cannot yet see it is going to be a problem.


No one would be surprised to hear that a former software developer like me was arguing for diversifying into a tech sector, especially software development, and for online voting.  We have a sort of tech sector now, but it is far too intertwined with finance to be a proper diversification.  One small step  which I did call for back in 2008 came to pass in the last couple of years  - putting  official notices on the States own web site.


Naturally some of those big items were never going to get much progress unless there was a significant change in States members and their political priorities as a group.  Of course that didn't (hasn't) happen.  And the small victories.  Easy really when you know how the highly personalised and individualistic system works.  Make a fuss in an election , and then go relatively quiet.  At some point the info seeps into the consciousness of the elected members and you let them think they dreamed it up all by themselves.  It only takes 7 to 10 years!  The frightening thing is we don't have that long to get properly on top of the big issues from a decade ago - climate change, sustainability and  living within our means.

UN declaration on peasant rights

The UN  Human Rights Council has passed the Declaration on the Rights of Peasants and Other People Working in Rural Areas.

"In a resolution adopted by a vote of 33 in favour, three against and 11 abstentions, the Council adopted the United Nations Declaration on the Rights of Peasants and Other People Working in Rural Areas, and it recommended that the General Assembly adopt the United Nations Declaration. It invited Governments, agencies and organizations of the United Nations system and intergovernmental and non-governmental organizations to disseminate the Declaration and to promote universal respect and understanding thereof."

The UK has consistently voted against the declaration at previous stages of its evolution. It did so again today. The other two no votes were Hungary and Australia.




It will now go forward to the General Assembly.

Among the key rights are :

The right to land, access, use and management of land, necessary for the realization of the rights to an adequate standard of living, to health and to participate

The right to seeds and biodiversity, includes right to use, grow, reuse, store, develop, exchange, transport, give and sell seeds. By developing their seeds, peasants build more resilient and sustainable farming systems, able to feed others in spite of climate change.

The right of food sovereignty, referring  to the right to a development model in which peasants can not only choose but also develop their own means of production, processing,distribution and consumption, in such a way that it valuesand improves the social and working conditions within agricultural and food systems.

The right to decent income and means of subsistence

Worldwide there are 2 billion peasants and other people working in rural areas who would be coverd by these rights if adopted.

To my mind this declaration is almost diametrically opposed to the  current situation in Jersey. That 1974 law was designed and works to ensure land is available to commercial farmers. Here we have no land occupation  rights.  You can own land, but the right to work agricultural land is  tightly controlled by the States.  To be a bona fide agriculturalist as they put it you have to have a margin profit of £40,000 per year and meet other restrictions.  As a smallholder the amount of land you can occupy is limited but you still have to have £5,000 margin.  The law intentionaly  denies subsistence and self supporting occupation - legally I guess its illegal to be a peasant in Jersey!  A synopsis of the law is at https://www.gov.je/Industry/FarmingFishing/PlantsProduce/Pages/LandControl.aspx

Food soverignty is a concept that seems unknown to Jersey policy makers.  Our approach is to corral all producers into a one managed scheme. You only have to look at the struggle Darren Quenault had to set up his own dairy to see how this right isn't supported locally.

The right to a decent income certainly doesn't exist in Jersey for self employed and seasonal workers. For starters if you own your land, those fields are counted as assets against you for income support.

The States need to do some serious policy revision thinking before this declaration gets to the UN General Assembly if it has any intention to be compliant.

So bad I posted it twice!

"The States communications team are being given the authority to ‘approve’ information released to the public if it is deemed likely to cause reputational damage" 
https://www.bailiwickexpress.com/…/freedom-information-sp…/…

On the same days as  "Children's Service cover-up claimed by whistleblower"     https://jerseyeveningpost.com/news/2018/07/23/childrens-service-cover-up-claimed-by-whistleblower/ 






Outrageous. I guess we now know why they needed to up the communications unit to 34. It didn't even exist 12 years ago! Back to controlled, manipulated, States managed newsflow and information. Mushrooms prosper by being kept in the dark and fed sh*t. Are you a human or a fungus?


In the beginning was the plan, and then the specification.

And the plan was without form, and the specification was void.

And the darkness was upon the faces of the implementors;

And they spoke unto their managers, saying: “It is a crock of cow manure, and it stinketh.“

And their manager went to the second level manager, and he spake unto him, saying: “It is a crock of excrement, and none may abide the odor thereof.“

And the second level manager went to the third level, and he spake unto him saying: “It is a container of excrement, and it is very strong, such that none may abide before it.“

And the third level went to the division manager, and he spake unto him, saying: “It is a vessel of fertilizer, and none may abide its strength.“

And the division manager went to the assistant vice-president, and he spake unto him, saying: “It contains that which aids plant growth, and it is very strong.“

And the assistant vice-president went to the vice-president, and he spake unto him, saying: “It promoteth growth and it is very powerful.“

And the vice-president went before the president and spake unto him, saying: “This powerful new product will promote growth of the company.“

And the president looked upon the product and saw that “It was good!

Ineffectual changes

The recent election in Jersey didn't catch the imagination of voters it seems.  A few small changes and novel occurrences didn't make much of a dint in the voter turnout.


Moving the election to May instead of the usual Autumn period  didn't do it, even though the weather was favourable. Personally it meant for the first time in three decades I had no active part in a significant election where I was eligible to vote.  April and May are the busiest times for  general fruit and vegetable growers.  Miss the planting season and it is most of a year's earnings lost.  So I wasn't a candidate and couldn't get involved in campaigning. 


Unprecedentedly I think half the ministers didn't restand.  And at least two ministers decided to refight deputy seats rather than  put themselves before an Island wide electorate.  The result is that voters were unable to give those minister a drubbing  if they felt policies or performance warranted it.  In a party system of course they have the chance do do that by proxy by voting against the party candidate.  This aspect is particularly  irritating to me. The ministers stand as individuals, but act together under collective responsibility.  But as soon as an election comes they want to be independents again and deny collective responsibility where it really matters - to the electorate.  


The third different thing this election was the presence of a party with a worked out manifesto and standing enough candidates to have an outside chance of being a major  driving force in the assembly. In those respects I think what Reform did was a service to the electorate and set a bar for others in future election about the level of detail and comprehensive nature of manifestos the electorate might expect. 


Perhaps the most notable  feature of this election was the fact that all but two of the candidates restanding for election were returned.  Given there were 9 sitting members contesting  8 senatorial seats one casualty at least was guaranteed there.  The other was constable of St Mary in a re-run of the last election which was similarly close the other way.  The conclusion I draw is the that the electorate was fearful and went for the 'better the devil you know' option.  What they feared is the question.


And the outcome of this election?  Well actually not much change as I can see.  I don't expect much from the new Assembly on ecology, sustainability or  resource dependency.   That the election in the Assembly for chief minister is between a former accountant and another former accountant probably speaks volumes for what is the principal and overriding concern and interest of the elected members.  And as they say if you want to know what someone values look at what they count. 

CoM, CoI and coincidence?

As I write at least six of the current Council of Ministers are not seeking re-election to the States let alone as ministers. . Add in a handful of assistant ministers also bowing out at the prospect of another election and one has to wonder what has triggered this unprecedented winnowing of the chaff.

Commonly  social media  messages refer to rats jumping a sinking  ship.  I doubt that is the cause. If the CoM had lost a vote of confidence in the assembly, or serried ranks of protesters were evident outside the latest meetings I might  take that suggestion.  

I put to you another reason - their job is done as they see it.  Is it coincidence that many of those ministers were in the Assembly when the events leading to the Committee of Inquiry into abuse in care was put in place.   Some of them worked very hard to undermine, deflect and eviscerate the terms of reference and the standing and findings of the CoI.  Well the CoI reported  and there is now nothing left to attack.  The findings, however weak, are being implemented and the questions that never were put are now unnoticed.  Questions of no import to anyone except perhaps historians of some future age.

Job done. Arses covered, reputations quickly buffed up again and those who were to be protected have been .  Rewards, titles, and invitations in the post soon....

Still wondering who runs Jersey?

As a follow up to my last posting,  I noted this  Population policy delayed until after May elections As though the ministers didn't know the date of the coming elections, or that policy might need scrutiny.  All very convenient for the don't change the near enough non existent population policy line up of the Chamber and IOD.

Another long time proponent of  immigration and growth is Mark Boleat.  He appears as a research fellow for the newly rebranded/relaunched  Jersey policy forum  I was intrigued to read they are registered as a charity.  I can quite understand such an organisation being a not for profit.  But its  difficult to see how they would meet the  usual criteria of a charity. I don't know any of the 3 executive officers but I am acquainted with a few of the board members.  A fairly typical selection of what elsewhere is termed the great and the good.   Comfortably middle class and  well off for the most part.  Also I did a quick call to a few other acquaintances who run what you might call informed politically aware organisations - the sorts who respond to  States consultations.  Not one had ever had any communication from the Jersey Policy Forum. All the more intriguing when the web site states "

Our values

We believe that working together in a diverse and democratic society is best achieved when people have an open mindset and are focused on achieving common purposes. We work to encourage civic engagement from all people who live, work and play in Jersey to listen to each other’s voices and create a better future together. We adhere to the following values and principles in our approach to our work and invite you to join our Knowledge Partnership:"

If you still aren't convinced about the magic circle effect of these 'independent' bodies, look at the invited speakers for their forthcoming conference. 
Senator Ian Gorst - Jersey's Chief Minister,
Charlie Parker - Chief Executive for the States of Jersey,
Deborah McMillan - Jersey's first Children's Commissioner,
David Goodhart, author of The Road to Somewhere,founder of Prospect magazine and Head of the Demography, Immigration and Integration Unit at the Policy Exchange think tank based in London.


You might not know of David Goodhart, but this piece should leave you in no doubt about where he comes from politically.   Populist revolt future politics Does that look like a balanced, programme to you ? Pure coincidence of course that while the Chamber, IoD and even the Chief Minister  refuse to discuss population policy ahead of the election, the one person given a platform is David Goodhart aka the liberal Powellite.

Comments of interest

Sometimes it is the small asides that are the most revealing.  Two such incidental points came to my attention this week and both made me shudder.

First the Bailiff, taken from  the piece  innocent and anonymous until proven guilty  There's much could be said about the whole article and the importance of justice being seen to be done.  However I want to focus on a sentence almost at the end of the piece.  " On the subject of whether centeniers should be able to form part of the jury, the Bailiff commented that it was “not a problem” in his view, but that it could be for some members of the public". 

Centeniers are police officers- they carry a warrant card and have pretty much the same powers as paid uniformed police officers at least within their own parish.  In most civilised parts of the world the notion that police officers could sit on juries would be seen as dangerous and often disallowed. Police Officers in England and Wales used to be excused jury service until the changes in the Criminal Justice Act 2003.

The changes brought in in 2003 were challenged, see  police jurors are a threat to fair trials. One judge said: "I do think the notion of opening up juries to those actually involved in the legal system is a step too far. When I say the legal system, I include police officers." Another said: "I think it's too far to have judges and policemen sit on juries... In a criminal case police in particular are not who you would want on a dispassionate jury."

Actually the problem with centeniers on juries is rather worse.  Centeniers are the only ones who can bring charges.  As such they are also part of the prosecution system.  The concept of  having police officers who are also prosecutors sitting on juries is a true challenge to the perception of impartiality of  juries and the right of defendants to a fair trial.

The situation in Jersey goes one step further in its difficulties than the English system.  Over there the understanding is that police officers, MP's judges who are called to serve on juries do so outside of any court where they have regular contact.  In England and Wales what not to difficult, but in Jersey  it is effectively impossible. 

Couple all of that with the absence of private prosecutions and the Attorney General's unchallengeable ability to determine whether prosecutions can proceed (not in the public interest).  Id say that really ought to be a concern for all  members of the public, and it is hard to fathom how the Bailiff can so readily dismiss Centeniers on juries as "not a problem".

 The second item that caught my attention  was a comment on a  twitter thread about having a population debate ahead of the coming elections in Jersey. Kevin Keen suggested a population debate.  The interesting part is this.

In theory no  States assembly can bind a future. Of course they do it all the time by undertaking long projects and capital  builds that require maintenance or (bond repayments) for decades to come.  But more worrying is the fact Chamber appear to think their debate is somehow a States policy making body.

I am also incredulous that any organisation is would want a subject of importance like population not to be debated ahead of an election.  Incredulous unless of course that body though they could better manipulate the outcome post election by non democratic means?  Is this where we have arrived in Jersey?


And it isn't an isolated example.   Our new Chief Executive announcing his plans does so at the Chamber of Commerce. https://www.gov.je/News/2018/Pages/ChiefExecChamber.aspx?lipi=urn%3Ali%3Apage%3Ad_flagship3_feed%3BazhDyuz4QUO2aZvfFn3XqA%3D%3D


Of course the Chamber of Commerce is free to debate or not debate issues as they see fit.  But this proximity of the Chamber to the States policy making is not a healthy thing.  In many jurisdictions  Civil Servants would not  be permitted to make policy announcements to a private body without it first being released to Parliament.  The UK Civil service management rules are published  https://www.gov.uk/government/publications/civil-servants-terms-and-conditions

"Principles

The central framework derives from the need for civil servants to be, and to be seen to be, honest and impartial in the exercise of their duties. They must not allow their judgement or integrity to be compromised in fact or by reasonable implication. In particular:

civil servants must not misuse information which they acquire in the course of their official duties, nor without authority disclose official information which has been communicated in confidence within Government, or received in confidence from others. They must not seek to frustrate the policies, decisions or actions of Government either by declining to take, or abstaining from, action which flows from ministerial decisions or by unauthorised, improper or premature disclosure outside the Government of any information to which they have had access as civil servants;

civil servants must not take part in any political or public activity which compromises, or might be seen to compromise, their impartial service to the Government of the day or any future Government;

civil servants must not misuse their official position or information acquired in the course of their official duties to further their private interests or those of others. Conflicts of interest may arise from financial interests and more broadly from official dealings with, or decisions in respect of, individuals who share a civil servant’s private interests (for example freemasonry, membership of societies, clubs and other organisations, and family). Where a conflict of interest arises, civil servants must declare their interest to senior management so that senior management can determine how best to proceed; and

civil servants must not receive gifts, hospitality or benefits of any kind from a third party which might be seen to compromise their personal judgement or integrity.

Neither the Civil Service Code (https://www.gov.uk/government/publications/civil-service-code/the-civil-service-code) nor this central framework is comprehensive. It does not deal for example with such issues as isolated neglect of duty, failure to obey a reasonable instruction or other forms of misconduct which may properly be dealt with under disciplinary arrangements."