A swirling vortex of political gamesmanship, played against the backdrop of a crucial Brexit vote and a weakened U.K. coalition government, left the Cayman Islands and its sister British Overseas Territories on the losing end of Tuesday’s House of Commons vote.

The vote to amend Britain’s Sanctions and Anti-Money Laundering Bill to force British Overseas Territories – but not U.K. Crown Dependencies – to make registers of company owners public, may fundamentally change both Cayman’s financial services business model and its relationship with the Mother Country, officials on both sides acknowledged this week.

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The amendment to the bill, which now goes to the House of Lords for a largely procedural vote, will require all 14 remaining British territories to make beneficial ownership of companies registered in their respective jurisdictions public. Cayman has such a registry now, but it can only be inspected by certain personnel for the purposes of specific law enforcement or tax compliance requests.

If the territories do not adopt the prescribed measures, the amendment requires the U.K. government to draft orders in council to force the territories to make company registers public.

“We do not want to legislate directly for [the overseas territories], nor do we want to damage our long-standing constitutional arrangements which respect their autonomy,” Sir Alan Duncan, MP with responsibility for the U.K. Foreign and Commonwealth Office said Tuesday. “However, we’ve listened to the strength of feeling in this House on this issue and accept that it is, without a doubt, the majority view of this House that the overseas territories should have public registers ahead of it becoming the international standard.”

Storm brewing

The push to “open up” company ownership registers in both the U.K. and its territories was first proposed by former British Prime Minister David Cameron and his then-Chancellor of the Exchequer George Osborne in 2013.

Various iterations to put that proposal into legislation, mostly led by U.K. Labour Party politicians, were made over the past two years. Attempts to insert it into the Criminal Finance Bill before the House of Commons failed in April 2017 and a separate attempt to insert it into the House of Lords version of the anti-money laundering legislation failed again in January.

However, Cayman Islands London Office Director Eric Bush warned later in the same month that another attempt to insert the amendment into the bill was coming – perhaps as early as February.

“It can reasonably be expected that [MPs] will file a similar amendment,” Mr. Bush said on Jan. 30.

The expected amendment requiring the open public register did not come until Thursday, April 26 – the last possible day amendments could be filed onto the Sanctions and Anti-Money Laundering Bill, due to have its third and final reading before the House of Commons on Tuesday.

Two amendments were filed April 26. The first, put forward by a coalition of Labour politicians paired with a rebel group of 19 conservatives, as well as members of the Scottish National Party, sought to single out the British Overseas Territories for the public company register requirement.

The second amendment, filed by a Labour-led group, sought to include both British territories and Crown Dependencies (Jersey, Guernsey, Isle of Man) in the requirement.

According to sources familiar with the issue, Cayman was not overly concerned about the Labour-led amendment, because it knew the Conservative Party – the largest representative group in the U.K. coalition government – would not support it.

However, the amendment singling out the British Overseas Territories was worrisome, according to sources with knowledge of the matter. It was co-filed by conservative MP Andrew Mitchell and supported by such notables as former U.K. Attorney General Dominic Grieve, as well as the U.K.’s “father of the House of Commons,” 77-year-old Kenneth Clarke, MP.

Moreover, Prime Minister Theresa May’s coalition government was apparently unaware the Conservative-Labour-SNP version of the amendment was coming, according to sources familiar with the matter.

“The political mishandling of this was legendary,” said one U.K. source, speaking on condition of anonymity.

Rescue attempt

On Monday of this week, the Theresa May-led coalition government filed what was referred to as a “conciliatory amendment” to the Sanctions and Anti-Money Laundering Bill.

This proposal, which looked to stave off both amendments to the bill filed April 26, would have included the overseas territories and the Crown Dependencies in the requirement for the public company ownership register. However, that requirement would only take effect “as and when public registers became a global standard.”

It was believed, as of about midnight Monday U.K.-time, that this was the amendment version the House of Commons would consider Tuesday during the anti-money laundering bill’s third reading.

However, between midnight Monday and about noon Tuesday, U.K. time, something had changed.

Speaker of the House of Commons John Bercow ruled Tuesday that the coalition government’s amendment had been filed late and would not be considered. It was correct that the amendment was filed out of time, the deadline having been close of business on April 26, but it was within Mr. Speaker Bercow’s power to allow it nonetheless.

He did not.

It was at this stage that Cayman Islands representatives realized the fight had been lost.

U.K. and Cayman sources both speculated as to the reasons for why the conciliatory version of the amendment was not accepted for debate. Many noted that a crucial Brexit bill concerning the operations of the single market once the U.K. leaves the European Union next year was up for debate in the Commons as well.

“[The public register amendment] was being used as a bargaining chip,” one source said.

However, the issues surrounding Brexit and its potential impacts are so numerous, and the coalition that supported the amendment to the anti-money laundering bill so diverse, others doubted any one issue could be pinpointed as the reason the amendment singling out the overseas territories was approved.

Adding insult to injury

Later Tuesday in the House of Commons, Sir Alan Duncan, the minister who represents the territories in the Commons, confirmed that the amendment to single out the overseas territories for the adoption of the public company ownership register would not be opposed by the U.K. coalition government.

He asked that the other amendment filed April 26, which would have included both the Crown Dependencies and the overseas territories, be withdrawn.

From Cayman supporters’ perspectives, it was the worst possible outcome.

“Her Majesty’s Government is acutely conscious of the sensitivities about this in the overseas territories and the response it may provoke,” Sir Alan said. “I therefore today [Tuesday] give the overseas territories the fullest possible assurance that we will work very closely with them in shaping and implementing the order-in-council which this act of parliament might require.”

Sir Alan further promised all the “legal and logistical support” the territories might ask of the U.K.

It was Sir Alan who stated on the same day that it was the “majority view of the House” that the British Overseas Territories should be singled out in the amendment to the Sanctions and Anti-Money Laundering Bill.

Sources with knowledge of the matter told the Cayman Compass that the minister for the Foreign and Commonwealth Office would not have made such a pronouncement in the House without the support of U.K. Secretary of State Boris Johnson and the coalition government.

Next steps

In the 24 hours after the vote was taken, U.K. media were widely speculating about whether Cayman and the rest of the British Territories in the Caribbean and the Atlantic, including Bermuda and the British Virgin Islands would seek independence as a result of the vote.

Cayman London office director Eric Bush told the U.K. public radio: “We’re exploring all options. The decisions and actions taken [Tuesday] were taken in haste, were taken with misinformation, rhetoric and Hollywood jargon. The Cayman Islands government is not going to do that.

“The actions taken [Tuesday] are certainly a blow to the relationship. It shows a lack of trust, it shows a disrespect and disregard [for] the constitution.”

Premier Alden McLaughlin told Cayman Islands public broadcaster Radio Cayman that the local government is seeking legal advice with an eye to challenging the threatened order-in-council.

The premier’s pronouncements were supported by Cayman Speaker of the House McKeeva Bush: “In the event that the matter cannot be sorted out through negotiation, the premier … and the Cabinet have my full support to determine the legitimacy of the proposals through the legal system as [they] appear to be a clear violation of the Cayman Islands Constitution, an individual’s legitimate right to privacy.”

Cayman’s Deputy Opposition Leader Alva Suckoo also commented on the U.K. legislative action, saying, “It is clear that despite recent pronouncements of a renewed partnership with the overseas territories by the U.K., we are still wrapped in the shroud of colonialism and it is up to us, the elected leaders, to protect these islands from the self-serving and disingenuous actions of those who claim to be our partners.”