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AmericasMarch 7 2005

Independence debate heats up

Bermuda is discussing whether to sever ties with the UK, with opinion sharply polarised. Mairi Mallon assesses the implications for the financial sector.
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There are “almost no positives” and potentially many negatives to breaking ties with the UK, is the response of the Association of Bermuda International Companies (ABIC) to plans by the government of the British possession to do just that.

In 1988, the centre-left Progressive Labour Party (PLP) administration was elected for the first time, on a mandate to make Bermuda independent. For its first five years in power, it let the issue lie, saying that it would be dealt with in due course. That time arrived last year when the PLP swept to power for a second term. Now the wealthy offshore financial centre, which is home to the world’s third largest insurance market and 13,500 international companies, is in the middle of a protracted debate about whether to go it alone.

The mid-Atlantic island is split down the middle over the benefits of separating from the UK or maintaining the status quo. In general, the business community has welcomed the debate, but there is fear that the change could damage the climate that allows so much money to be made in the flourishing financial sector.

Note of caution

In January, Bermuda’s governor, Sir John Vereker, backed the need for a debate on independence while sounding a note of caution. HSBC bought out Bank of Bermuda last year for $1.3bn and Sir John chose a visit by HSBC’s board to point out the dangers of leaving the issue hanging in the wind. “I am, of course, acutely aware that what business dislikes most is uncertainty, such as over Bermuda’s future constitutional relationship with the UK,” he said.

Not all business organisations are negative when it comes to the debate. The Bermuda International Business Association (BIBA), representing businesses that service the international companies, such as bankers, lawyers and accountants, said that discussion of the issue showed that Bermuda was a mature jurisdiction.

Deborah Middleton, CEO of the BIBA, says: “We intend to go about the discussion of independence with the same careful consideration and thought used to develop Bermuda as a financial centre of choice. Should the island become independent, nothing will change for the overseas investor as far as service is concerned. We anticipate business as usual.”

The population is split roughly along racial lines: 60% is black, 35% white and 5% other. Many of the black population regard self-governance as the next step after the election of the PLP, which enjoys their overwhelming support. But the mainly white business establishment is worried about anything that might rock the economic boat.

The government has not said if it will go for independence as a result of the debate, but premier Alex Scott has said he is pro-independence. His line has been that independence will come if the people want it.

Another controversy is whether the issue will be put to a referendum. The PLP has ruled this out, saying that it was re-elected on a pro-independence platform and that would suffice. But the opposition, centre-right United Bermuda Party (UBP), which ran the island from the late 1960s to 1998, is pushing for a referendum.

In this charged environment, business has had to tread warily. International companies have stressed that independence is a matter to be decided by Bermudians alone, but overseas companies make up 7% of the island’s economy and are extremely influential.

Additionally, most foreign workers are white, from places such as the UK and other EU states, Canada and the US, and many black Bermudians resent the way this sector dominates the economy.

ABIC causes outcry

When the ABIC, which represents 133 international companies with a physical presence on the island, spoke out in a letter to the government last year, it caused an outcry. “Independence should not be forced on a reluctant population,” it said.

The legal and judicial system is the “next most important” issue, it said. International companies regard the right of final appeal to the Privy Council in London as a vital factor in ensuring a stable business environment. “It is essential that stability be maintained in this area,” the letter said. “Clarity on who would appoint the judiciary, rights of appeal to the Privy Council, or other body, the overall governance structure and corporate and individual rights must be determined in advance.”

The ABIC added that several constitutional and other issues, such as electing the head of state, control of the small, part-time conscription army the Bermuda Regiment, renegotiations of treaties and how the constitution is changed, should be predetermined. There are also concerns about the island’s immigration policies, with companies wanting assurances that foreigners working there will not be removed if independence becomes a reality.

The backlash from the black community was expressed forcefully by Lieutenant Colonel David Burch, chief of staff to former PLP premier Jennifer Smith. Those opposing independence were essentially racist, he said, because they did not believe that black people could govern themselves. And he had a blunt message for “foreigners”: “Butt out – this has nothing to do with you.”

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