Barbados

Barbados: Too Entrenched to Expire


By Sir Trevor Carmichael, KA,LVO,QC, Chancery Chambers, Barbados (01/02/2014)

"Justice without strength is helpless, strength without justice is tyrannical……unable to make what is just strong, we have made what is strong just" Blaise Pascal 1623-1662 in Pensées at 298.

 

 

The dualism presented by Pascal in the seventeenth century continues to play itself out today as the regulatory battle rolls on between the small international financial centres (IFCs), the international regulatory agencies and their chief patrons, namely the elite developed nation states.  In such a struggle, the weakly regulated IFC without a well-structured domestic socioeconomic foundation is at a distinct disadvantage.  The converse, however, presents an ongoing opportunity for the strong IFC to pursue policies geared towards the development of a more vibrant international business sector.

 

Innovation and Education

In this regard, Barbados' historical strength as a well governed and regulated jurisdiction continues to act as both shield and sword.  In the 2013 Global Innovation Index, it is ranked third in the Caribbean and Latin America with only Chile and Costa Rica slightly ahead in innovation.  More specifically, Barbados ranked as number one in the world in the number of international patents filed by residents - a feature which complements its very high ranking on the sums spent on education, the length of time by students in schools, tertiary enrolment, information and communications technology access and use, research collaboration between the university and business and foreign direct investment net inflows and outflows.

 

In the annual 2013/2014 report of the World Economic Form (WEF) Barbados' educational system received similar commendation.  The report placed it as number six in the world which was an improvement from the previous year's position of eleven. The words of the WEF are instructive noting that Barbados "continues to benefit from a fairly skilled labour force thanks to a high-quality educational system and high enrolment rates in secondary and tertiary education, well functioning institutions and a solid infrastructure.”

Treaty Environment

These present day accolades refer to a jurisdiction which characteristically and for a long time has been governed with a keen recognition of the need for sound regulation and irrefutable transparency.  Such an orientation is at the core of the jurisdiction's history of a double and bilateral treaty development which continues to gather momentum. 

 

For a long time the double tax treaty has served as a means whereby certainty as to the tax treatment of transactions is given to the jurisdictions who are parties to that treaty.  It is also the vehicle which establishes and sets out clear administrative procedures, as for example the long heralded mutual agreement procedure.  By allocating in the treaty taxing rights between the host and capital exporting country, a clear signal is given to both the tax administration and the tax payer as to their respective rights.  Indeed potential investors are able to know ab inito the rules which will be applied in the investment exercise.

 

Presently over 3,000 of such treaties exist among the various global jurisdictions.  They carry the imprimatur of one international institution and another major economic political trading group in that both OECD and UN models are the two treaty guidelines which are globally followed.  Indeed, the latter is to a large extent an outgrowth on the former.  The OECD countries, not surprisingly, have been the most active in negotiating and signing tax treaties; most OECD member countries have a network of fifty to eighty treaties.

 

Barbados as a small jurisdiction geographically positioned in the Caribbean, has like the OECD countries themselves, enjoyed a penchant for the tax treaty.  At the beginning of 2013, it had thirty two double taxation agreements in force with the global CARICOM agreement counting as ten individual agreements.  Later in 2013, it added new treaties with Ghana, Bahrain, Quarter and San Marino.  With Italy, Belgium, Singapore and Slovak Republic, it has initialled treaties which currently await signature. As regards bilateral investment treaties it currently has nine in force, and additionally with Ghana and the Belgian Luxembourg Economic China (BLEU) it also has two such treaties which are awaiting ratification. 

 

In the area of the Tax Information Exchange Agreements (TIEA), it has for many years been party to such a protocol with the USA whereby it was eligible for additional benefits; and more recently it has negotiated such an agreement with Denmark.  It awaits ratification of TIEAs with Greenland and the Faroe Islands; and it has initialled agreements with Germany, France and South Africa which now await signature.

 

With such a wide arrange of treaty involvement, Barbados continues to cement its policy commitment to certainty and transparency.  It is therefore not surprising that the jurisdiction has avoided the strictures of the Financial Action Task Force (FATF) and its affiliate the Caribbean Financial Action Task Force (CFATF).  At the February 2013 Plenary in Paris, the former issued two public documents the first of which identifies: (1) jurisdictions that have strategic AML/CFT (anti-money laundering and counter-financing of terrorism) deficiencies and to which counter-measures apply and (2) jurisdictions with strategic AML/CFT deficiencies that have not made sufficient progress in addressing the deficiencies or have not committed to an action plan developed with the FATF to address the deficiencies.   The second public document identifies jurisdictions with strategic AML/CFT deficiencies.  Barbados, with its well-developed AML programmes and its treaty tradition easily avoids being identified with those jurisdictions to which the warning words are directed.

 

Shipping Integrity

Within Barbados' own legislation and practice regulatory recognition has always been preeminent.  One area which readily comes to mind is the shipping industry, for in the nautical milieu such standards are a necessity.  The Barbados Ship Registry was started over a hundred years ago under the auspices of the UK Merchant Shipping Acts. In 1969, Barbados joined the United Nations International Maritime Organisation (IMO) and in 1993 it formulated new shipping legislation which would allow foreign owners and nationals to own and man Barbados registered ships, all of which culminated in the Shipping Act 1994. In its present form the Barbados Maritime Ship Registry (BMSR), has been in existence since 1994.  It is a highly reputed open ship registry headquartered in London with offices around the world.

 

Within BMSR, great emphasis is placed on delivering the Registry’s services promptly while at the same time taking into account the many responsibilities, which are expected of a Maritime Administration by the shipping industry. The proactive approach to safety and inspection issues requires all vessels to be well managed and to be able to meet international maritime and environmental conventions. A wide range of internationally owned vessels of all types fly the Barbados flag, underpinned by the two commitments to the marine industry: Good Governance by way of a recognition of its responsibilities to the international maritime community and a duty of care by way of the recognition of its responsibilities to monitor the condition and operation of its ships and the conditions of employment of their crews.  Since ships operate under a complex set of legislative requirements, it is necessary to have a flag administration which is able to give both guidance in avoiding difficulties as well as assistance where difficulties cannot be avoided.  Today the relationship between Flag Administration and Ship Owner/Operator is very critical, with each relying on the other; and working as a team in relation to the management of their ships.  Barbados in its legislation and practice recognises this relationship.

 

With its international treaties, shipping soundness, and a freedom from the ills and evils of money laundering and crime, Barbados remains full of strength in a just environment.  It faithfully mirrors Pascal's dualism and in that respect combines the best of seventeenth century thinking and twenty first century reality.