An act which does not live up to expectations - despite the Caricom Act freedom of movement of capital and provision of services within CSME remains out of reach for most Guyanese
Business Page
By Patrick van Beek
Stabroek News
March 18, 2007
Introduction
Last month I was present at the Rotary understanding dinner where the President of the Caribbean Court of Justice (CCJ) Justice Michael de la Bastide gave the main address. I listened with interest as Justice de la Bastide described some of the challenges which faced the region in implementing the Revised Treaty of Chaguaramas, particularly when there were inconsistencies between domestic law and the treaty.
I was surprised to learn that Guyana actually has an Act to deal with such inconsistencies: the Caribbean Community Act, 2006 ("Caricom Act"), which gives the Treaty the force of law and contains in Section 8(1) the provision which states that, "In the event of any inconsistency between the provisions of this Act and the operation of any other law other than the Constitution, the provisions of this Act shall prevail to the extent of the inconsistency."
My mind immediately sprang to several pieces of legislation which restrict the free movement of capital and the provision of services across the economic region: the Insurance Act 1998, the Securities Industry Act 1998, The Financial Institutions Act and the Foreign Exchange (Miscellaneous Provisions) Act to name a few.
My natural instinct was that with Section 3(1) of the Caricom Act stating that "…the Treaty shall have the force of law in Guyana" and there being several inconsistencies between the Treaty and the Laws then the Treaty would prevail.
A treaty with the force of law
Though I am not a lawyer as an Actuary I have had considerable exposure to contracts and laws, particularly in the areas of financial services. However trying to decipher whether the Caricom Act overturned legislation which prevents the free movement of capital in the region or made it a valid defence if such a law was contravened defeated me.
To begin with the treaty is worded carefully: generally it does not confer a right on citizens rather it imposes obligations on member states eg Article 40 states that "1. The Member States shall, in order to ensure the proper functioning of the CSME, remove among themselves: (a) restrictions on the movement of capital payments;…" and Article 41 "1. The Member States shall, where necessary and subject to paragraph 2 of this Article , grant the authorisations required for the movement of capital mentioned in Article 40 on a non-discriminatory basis."
I was then not sure if a law which gave the Treaty the force of law would actually mean anything - after all can Guyana as a sovereign state be in breach of an Act that says it must do something? Legal inquiries suggest that indeed the Treaty requires that the existing legislation be amended to be consistent with the Treaty. However though failing to do so may place Guyana in breach of the Treaty -this is not a valid defence in the case of a contravention of one of the inconsistent laws.
The President may amend any existing law to bring conformity
Thus it appears that the Caricom Act does not live up to my initial expectations and legislation must be amended or passed before Guyana is in compliance with the Treaty. Before I list some of the areas where I believe there is an inconsistency. It should be noted that section 8(2) of the Caricom Act states "The President may by order subject to affirmative resolution of the National Assembly made at any time before 31st December 2007 amend or repeal any existing law, other than the constitution, to bring that law into conformity with this Act or otherwise for giving effect or enabling effect to be given to it.". Thus, as long as it is done so by the end of this year, there exists a mechanism by which the President, in conjunction with the National Assembly can order the required changes to be made.
Foreign Exchange (Miscellaneous Provisions) Act - restriction on borrowing or lending foreign currency to persons outside
of Guyana
My award for the most draconian of those I will cover today goes to this act. Despite a so called freely convertible currency this essentially means that if residents want to save in any currency other than Guyana dollars they will have to resort to keeping it under the mattress since they require ministerial approval before a foreign currency account can be operated or foreign currency can be borrowed or lent in a foreign currency to any person outside of Guyana.
Requiring ministerial approval is clearly an impediment to the free movement of capital within the region since a resident of Guyana cannot freely lend to persons outside of Guyana (unless it is in Guyana dollars). Note I do not think that the restriction on foreign currency accounts in Guyana is necessarily a breach of the Treaty, however if there is freedom of Capital movement and local banks are not permitted to provide foreign currency accounts then there could well be a flight of funds out of the country as locals look to open hard currency accounts elsewhere in the region.
This may also have a knock on effect on the Bank of Guyana Act 1998 - since Section 21 states "…a party shall not agree to settle, or settle under any agreement, any monetary transaction in Guyana in any currency other than Guyana Dollars (hereafter in this section referred to as "foreign currency") except with the permission of the Bank, after consultation with the Minister…." - thus allowing local banks to provide foreign currency accounts would appear to require an amendment here as well.
Insurance Act 1998 - requirement to hold
certain proportion of
assets in Guyana
Another one of my pet peeves, given that commercial banks have no restrictions, is that both pension schemes and insurance companies must hold a certain percentage of assets in Guyana. This prevents Insurers and Pension schemes from moving a portion of their capital freely and thus appears to be a breach of the provision in the treaty for the removal of restrictions on the movement of capital (article 40).
Insurance Act 1998 & Securities Industry Act 1998 - requirement for registered persons to be registered
in Guyana
Both our Insurance Act and Securities Industry Act provide for the registration of persons, yet one of the requirements that is imposed is that companies be registered in Guyana. This appears to be a breach of removal of restrictions on the right of establishment (article 33).
Financial Institutions
Act - capital requirements for foreign banks
The capital requirements for foreign banks are greater than those for local banks. This appears to be a breach of the removal of restrictions on banking, insurance and other financial Services (article 38).
Conclusion
Unfortunately, the Caricom Act does not provide the quick solution to the problem of inconsistent legislation which I thought when I heard the President of the CCJ talk on the matter. With many other laws on Guyana's statute books I am sure there are many other examples of inconsistent legislation or bodies which should have been established.
However the Caricom Act does give the President the mandate to amend or repeal legislation inconsistent with the Treaty. Given this is his last term in office, perhaps he may wish to leave a legacy as a Caribbean Premier who was proactive in adopting the requirements of the Treaty. We will find out when we know which inconsistent legislation remains on the statute books come Old Year's Night!