Channel Islands and Isle of Man

The Channel Islands and Isle of Man are ‘Crown dependencies’ of the United Kingdom – in effect jurisdictions separate to the UK but belonging to the British Crown. Their position differs, therefore, from that of Gibraltar, which is a British overseas territory (or colony of the United Kingdom). Like Gibraltar, the Channel Islands and Isle of Man enjoy a high measure of self-government, with their own legislatures and executives (subject to the ultimate sovereign authority of the Crown in London). In effect, the British parliament can override the islands’ legislatures by the government in Whitehall inviting the Queen to issue an Order in Council (which by convention she will always do). Likewise all acts by the islands’ parliaments need to be approved by assenting order of the Queen-in-Council. By these means, Westminster and Whitehall can assert de facto, if not de jure, control over the islands when they wish or need to.

Unlike Gibraltar, the Channel Islands and Isle of Man are not part of the territory of the European Union. However, Protocol 3 of the United Kingdom’s 1972 treaty of accession provides for their treatment as if they were within the customs union for the free movement of industrial goods and agricultural produce, and for equal treatment of all Union citizens within their jurisdictions. However, EU legislation in many other areas – such as the free movement of people and services, com­petition and taxation policies, and the operation of the structural funds – does not apply in the Channel Islands or Isle of Man. Nor are they represented in the European Parliament. (As a result of these arrangements, Jersey and Guernsey have chosen not to introduce value-added tax (VAT), with the former levying a domestic sales tax of three per cent and the latter none at all).

The Channel Islands and Isle of Man form a common travel area with the United Kingdom and Republic of Ireland, with immigration control being applied at the periphery. There are no controls on the free movement of people between the islands and the UK, and citizens of the islands are now entitled to full British citizenship. The combination of free movement with the UK and non-application of EU laws in certain fields, notably financial services, has created the potential for the islands to emerge as very significant off-shore centres outside the rules of the single market in services. The European Commission exercises continuing pressure on the British government to ensure that it uses its authority to prevent distortions of the market. Currently, Jersey, Guernsey and the Isle of Man are respectively the second, third and fifth largest tax havens in the world, with combined deposits of around € 1.5 trillion. (Switzerland, Liechtenstein, the Netherlands Antilles and Luxembourg are the first, fourth, eighth and tenth largest such havens).

September 2012

Copyright: Anthony Teasdale, 2012

Citation: The Penguin Companion to European Union (2012), additional website entry

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