Caribbean Trade Law and Development

Year: 2016

  • CCJ Issues Ruling in Gay Rights Freedom of Movement Case

    CCJ Issues Ruling in Gay Rights Freedom of Movement Case

    Alicia Nicholls

    Test cases in law are a legal academic’s dream. They  help to map uncharted legal waters by establishing important legal principles and rights, which, as precedents, would be binding in subsequent cases whose facts are similar. The consolidated  test cases of Tomlinson v Belize, Trinidad & Tobago brought by prominent Jamaican attorney and LGBTI (lesbian, gay, bisexual, trans, and/or intersex) activist, Mr Maurice Tomlinson, before the Caribbean Court of Justice (CCJ) aimed to do just that.

    Mr. Tomlinson challenged the consistency of discriminatory provisions contained in the Immigration Acts of the defendant states, Belize and Trinidad & Tobago, which classify homosexuals among the classes of prohibited immigrants. He claimed that the mere existence of those provisions infringed his right of entry as an LGBTI Community national under Article 45 of the Revised Treaty of Chaguaramas and the 2007 Heads of Government Conference Decision.

    Article XII of the Agreement Establishing the Caribbean Court of Justice gives the Court exclusive jurisdiction, subject to provisions of the Revised Treaty, in matters concerning the interpretation and application of the Revised Treaty. Freedom of movement of CARICOM nationals has been a sore point in Community relations, with some States claiming that their nationals are routinely discriminated against.  The Court rendered its landmark decision on the right of freedom of movement of CARICOM nationals in the case of Myrie v Barbados. The CCJ’s ruling in that case established definitively that CARICOM member states were bound by the 2007 Decision of the Conference of Heads of Government of CARICOM to allow all CARICOM nationals hassle-free entry into their territories and a stay of six months upon arrival. The only exceptions for refusing entry are where  the Member State deems a person to be “undesirable person” or where  it is believed the Community national seeking entry may become a charge on public funds.

    The points of law raised in the instant case are unique as it is the first time that a CARICOM national has challenged the immigration laws of a CARICOM member state on the basis of infringing the right of entry of LGBTI community persons. Mr. Tomlinson also claimed infringement of his right under Article 7 of the Revised Treaty to not be discriminated against on the basis of nationality only and that being a UWI graduate and thus a Skilled CARICOM National, his rights under Article 46 of the Treaty would also be infringed.

    The relevant sections from the two Immigration  Acts in question are as follows:

    Belize Immigration Act (Cap 156):

    5.-(1) Subject to section 2 (3), the following persons are prohibited
    immigrants-

    (e) any prostitute or homosexual or any person who may be living
    on or receiving or may have been living on or receiving the
    proceeds of prostitution or homosexual behaviour;

    Trinidad & Tobago Immigration Act

    8. (1) Except as provided in subsection (2), entry into
    Trinidad and Tobago of the persons described in this subsection,
    other than citizens and, subject to section 7(2), residents, is
    prohibited, namely—

    (e) prostitutes, homosexuals or persons living on
    the earnings of prostitutes or homosexuals, or
    persons reasonably suspected as coming to
    Trinidad and Tobago for these or any other
    immoral purposes;

    As a matter of context for readers outside of the Caribbean, LGBTI rights are still not recognised in Caribbean countries. No one needs to look further than the many archaic and discriminatory laws still found on our statute books, which though not all enforced, still discriminate against members of the LGBTI community and are incongruous to the requirement of legal certainty.

    Mr. Tomlinson argued that while he has never been himself denied entry into the defendant member states,  the mere existence of the provisions in question were inconsistent with his right of entry as to enter would amount to him being in breach of the law. As such, Mr. Tomlinson not only requested the Court to make declaratory orders declaring his right of entry to these states, but also that the provisions in question violated his right to freedom of movement and his right not to be discriminated against on the basis of nationality only. He also requested the court to order Belize and Trinidad & Tobago to remove homosexuals from the class of prohibited immigrants.

    For their part, the defendant states argued, inter alia, that the existence of the provisions in question in their Immigration Acts  has not hindered Mr. Tomlinson’s entry into their territories. They also did not deny that Mr. Tomlinson was entitled to entry and stay of up to 6 months. The defendant states also agreed that they did not see Mr. Tomlinson, a homosexual, as an “undesirable person” within the meaning given in the 2007 Conference decision.

    Judgment

    The Court agreed that homosexuals cannot be categorised as ‘undesirable persons’ and concluded that homosexual CARICOM nationals have a right to freedom of movement on the same terms as any other CARICOM national. However, in regards to the central issue on whether the mere existence of the challenged statutory provisions constituted a breach of those States’ obligations, the Court had consideration for the state practice in Belize and Trinidad & Tobago. Interestingly, the Court accepted Belize’s interpretation of section 5(1)(e) of its Immigration Act that homosexuals are only prohibited from entering the country in cases where they are engaging in prostitution or benefiting from acts of prostitution performed by others.

    Turning to Trinidad & Tobago, the Court found that unlike the Belize provision, the provision in the Trinidad & Tobago Immigration Act expressly prohibited the entry of homosexuals and not solely those seeking to engage in prostitution. The Court, however, accepted Trinidad & Tobago’s evidence of state practice that despite the existence of this discriminatory provision, it is not enforced.

    Noting the inconsistency of 8(1)(e) of Trinidad & Tobago’s Immigration Act with the Revised Treaty, the Court, however, made reference to Article 9 of the Revised Treaty which provides that “in the event of any inconsistencies between the provisions of this Act and the operation of any other law, the provisions of this Act [the Revised Treaty] shall prevail to the extent of the inconsistency’. The Court also noted that the state practice of Trinidad & Tobago and Belize does not suggest any incompatibility with the Revised Treaty or the 2007 Conference Decision. The Court held, therefore, that Tomlinson had no valid reason to assume that his rights would not be respected by the States.

    However, the Court further emphasised at paragraph 59 of the Judgment that it was not condoning the retention by member states of legislation which conflicts with Community Law and stressed that “[s]tates should ensure that national laws, subsidiary legislation and administrative practices are transparent in their support of the free movement of all CARICOM nationals”. The Court also dismissed Mr. Tomlinson’s claims that his rights under Articles 7 and 46 of the Revised Treaty were infringed.

    Jurisprudential Impact

    Although the defendant lost his claim and was denied the requested remedies, this test case achieved two main things. Firstly, the Court stated definitively that “the practice or policy of admitting homosexual nationals from other CARICOM States (not falling under the two exceptions mentioned in the 2007 Conference Decision) is not a matter of discretion but is legally required based on Article 9 of the RTC as this is an appropriate measure within the meaning of that provision”. Therefore, States cannot as a matter of practice deny entry of homosexuals into their territories. It is hoped, however, that member States will move with alacrity to repeal those discriminatory sections of their Immigration Acts, and also give greater importance to bringing their laws into conformity with Community rules.

    Secondly, in so doing, the judgment has added to the Court’s growing jurisprudence, including on the contentious issue of freedom of movement.This significance was not lost on the Court. The justices stated at paragraph 65 of the judgment that the case “raised novel questions and has contributed to the clarification and development of Community law”. While litigation may be costly for member states against which claims are brought, the testing of issues of law by Community nationals helps to clarify points of Community law and ensure that member states are held accountable and uphold the rights which they agreed that Community nationals should enjoy.

    Recognising the need not to discourage parties from bringing test cases, particularly in the Court’s current stage of development, the Court in its discretion found the current circumstances were “exceptional circumstances” under Part 31.1(3) of its Original Jurisdiction Rules 2015 and so ordered both parties to bear their own costs.

    Copies of the summary, entire judgment and the video of the delivery of the judgment are available on the CCJ’s website here.

    Alicia Nicholls, B.Sc., M.Sc., LL.B. is a trade and development consultant with a keen interest in sustainable development, international law and trade. You can also read more of her commentaries and follow her on Twitter @LicyLaw.

     

  • Barbados’ Upcoming CFATF Mutual Evaluation: What’s at stake?

    Barbados’ Upcoming CFATF Mutual Evaluation: What’s at stake?

    Alicia Nicholls

    A robust regime for anti-money laundering and combating the financing of terrorism (AML/CFT) is critical for the integrity and stability of a jurisdiction’s financial sector. This is doubly critical in Barbados where the international business and financial services sector is the second largest foreign exchange earner. Any perceived gaps in Barbados’ AML/CFT framework could sully its international reputation as a place for doing legitimate business, with repercussions for local employment, foreign exchange inflows and tax earnings.

    Barbados will shortly undergo its 4th Mutual Evaluation by the Trinidad-based Caribbean Financial Action Task Force (CFATF), the Caribbean regional associate member of the Financial Action Task Force (FATF). An intergovernmental body established in 1989, the FATF is the international standard-setter for AML/CFT and combatting the financing of proliferation. Last revised in February 2012, the FATF’s 40 recommendations plus its 9 special recommendations on Terrorist Financing and the Interpretive Notes are the internationally accepted standards for AML/CFT.

    Read more of my article at the Broad Street Street Journal here.

  • Are AML (Anti-Money Laundering) requirements hindering SME access to trade finance?

    Are AML (Anti-Money Laundering) requirements hindering SME access to trade finance?

    Alicia Nicholls

    Trade finance is the lubricant which facilitates the smooth conduct of international trade transactions. It allows traders to manage the commercial, country and currency risks inherent in cross-border trade transactions. In other words, trade finance is what helps importers pay for goods and services and ensures exporters are paid in full and on time for goods and services rendered internationally.

    A recent World Trade Organisation (WTO) report highlighted that “up to 80 per cent of global trade is supported by some sort of financing or credit insurance”. Although bank-intermediated trade finance instruments, such as documentary letters of credit and documentary collections are major types of trade finance, inter-company credit is also of importance.

    Trade Finance Gaps

    Despite the centrality of trade finance to global trade, the above-mentioned WTO report entitled “Trade Finance and SMES: Bridging the Gap in Provision” found that access to trade finance was not geographically uniform. This is supported by the  Asia Development Bank’s 2015 Trade Finance Gaps, Growth, and Jobs Survey which highlighted that “the global trade finance gap stands at $1.4 trillion, $693 billion of which is in developing Asia (including India and the Peoples Republic of China)” and that “while availability of trade finance has improved, gaps have become more concentrated”.

    Equally striking but not unsurprising is the large gap in access to trade finance between SMEs and MNCs. According to the WTO Report, “globally, 52 per cent of SMEs see requests for their trade finance rejected, against 7 per cent for MNCs”. Even more disconcerting is that “in some large developed countries, up to a third of SMEs face such challenges.”  In the aftermath of the Global Financial and Economic Crisis of 2008, small and medium sized enterprises (SMEs), particularly in Africa and Asia, have found accessing credit for trade increasingly difficult. The Caribbean was not mentioned in the WTO Report but 41.6% of respondents in Latin America identified ease of trade finance as a major obstacle to company’s exports, second only to Africa where 66% shared that view.

    SMEs are important drivers of trade, as well as generators of employment and economic activity. An OECD report stated that SMEs account for 60 to 70 per cent of jobs in most OECD countries. In developing countries, particularly small island developing states like the Caribbean, the majority of businesses would be classified as SMEs. Advances in technology have made new opportunities possible for SMEs. They generate growth and employment, which means trade is not just the domain of multinational corporations (MNCs) anymore. Access to trade finance is vital for SMEs not just to engage in international trade but to expand and to capitalise on market access openings created by trade agreements.

    In the aftermath of the Global Economic and Financial Crisis, banks have become a lot more conservative in their lending practices. SMEs lower access to “good collateral” and often shorter credit histories make them riskier prospects than established companies.  In cases where trade finance requests are rejected, SMEs either have to find an alternative source of financing the transaction or abandon it altogether. SMEs also often lack information on the trade finance options available to them.

    AML/Trade Finance Nexus

    According to the WTO Report, 41.4% of respondent banks cited anti-money laundering and know-your-customer (KYC) requirements as a barrier to providing trade finance. Moreover, the International Chamber of Commerce (ICC) identified the main regulations affecting Trade Finance as the Basel Accords on capital adequacy, liquidity and leverage, as well as regulations relating to AML/KYC/KYCC and sanctions.

    There are three main methods of laundering illicit monies are through the financial system, physical movement of proceeds across borders and through the international trade system. In regards to the latter, the FATF in its 2006 paper raised the importance of combatting trade-based money laundering (TBML).

    In its 2008 Best Practices Paper the FATF defined Trade-based money laundering and terrorist financing (TBML/FT) as:

    “the process of disguising the proceeds of crime and moving value through the use of trade transactions in an attempt to legitimize their illegal origin or finance their activities.”

    Common techniques include over or under-invoicing, multi-invoicing, false descriptions of goods and over and under-shipments if goods.

    Regulators in developed countries have been punitive in the fines and sanctions meted out to banks found to be in violation of anti-money laundering (AML) and know your customer (KYC) regulations. One of the unintended consequences is that banks have started to de-risk, that is, instead of identifying and managing risks on a case by case basis, they have sought to avoid risk altogether through cutting off correspondent banking relationships with banks in high risk jurisdictions or refusing to provide trade finance to firms with higher risk profiles. While banks could reduce their exposure through higher levels of KYC/CDD, the increased costs they would incur often outweigh the profitability from these business lines.

    One of the key findings from International Chamber of Commerce research shows that trade finance transactions have low risks of default, with an average default rate of short-term international trade credit of 0.021%, something which makes trade finance a lot less risky than one might originally think.

    The bottom line

    AML and KYC regulations are important for ensuring the stability and integrity of the global financial system and help to prevent trade-based money laundering which has negative consequences for both developed and developing countries. However, care must be taken that these regulations do not undermine SMEs access to trade finance, especially in poor countries. Denial of access to trade finance has implications not just for SMEs’ ability to engage in international trade, but to expand and to contribute to job creation and economic activity, with wider economic and sustainable development implications.

    In regards to improving access to trade finance, the WTO Report made 6 recommendations, namely reducing the limitations in existing multilateral programmes and increase programme size where possible, set a realistic objective for total trade coverage, increasing capacity building support, maintaining an open dialogue with trade finance regulators, improving the capacity of the international community to read markets and predict problems.

    Indeed, there is a role for closer WTO engagement with the Financial Action Task Force (FATF), the global standard-setter for AML/CFT rules, in dealing with the trade finance/AML intersection. Director General of the WTO, Roberto Azevedo, reiterated these sentiments in his speech at a meeting of the WTO’s Working Group on Trade, Debt and Finance where he opined that “greater cooperation between organisations could again lead to better market intelligence, which would enable us to be more responsive to problems as they emerge”.

    According to the informal report published by the WTO Secretariat of the Expert Group on Trade Finance’s Meeting in April, 2016, a proposal was also discussed by the Expert Group in regards to tentatively increasing the amount of trade covered by existing trade finance facilitation programmes operated by multilateral development banks from the current $30 billion to $50 billion, as well as discussions on the need for improved capacity-building in trade finance in developing countries.

    Besides this, official data on trade finance is lacking, and especially so in the Caribbean. As was noted by the Bank of International Settlements (BIS) in a 2014 report, there is no single or comprehensive source of statistics from which one can estimate the size or composition of trade finance markets. Further research needs to be done on financing challenges experienced by SMEs seeking to participate in international trade and on the impact that de-risking is having on trade finance. Such research will be critical in identifying the scope of the problem and in crafting strategies for monitoring and mitigation.

    Alicia Nicholls, B.Sc., M.Sc., LL.B. is an international trade and development consultant. You can read more of her commentaries here or follow her on Twitter @Licylaw.

  • What the debate on the Panama Papers forgets

    What the debate on the Panama Papers forgets

    Alicia Nicholls

    No two words have evoked as much emotion and debate internationally in recent weeks as have the so-called “Panama Papers”. The moniker refers to the cache of over 11 million emails, invoices and other documents leaked by a whistle-blower and originating from the Panamanian international law firm Mossack Fonseca.The files reveal the firm’s use of offshore vehicles registered in several offshore financial centres (OFCs) around the world to help thousands of international celebrity, public official and otherwise wealthy clients worldwide in their tax and asset management. The potential fall-out of the Panama Papers for Barbados was one of the topics of discussion by a panel at the Barbados International Business Association’s very informative Update Seminar last week Thursday.

    Read my full article in the Broad Street Journal here.