TOO MUCH INFORMATION: WHY did the UK get it wrong?

Filippo Noseda

This article builds on an article published in this Review in 2017 entitled “Too much information: when the UK gets it wrong” in which the author discussed the role of the UK in developing and forcing through various tax transparency measures (notably automatic exchange of information and public registers of beneficial ownership) and the constitutional fallout for the Crown Dependencies. The previous article argued that the UK’s thinking ran against several important human rights and data protection principles. Two years on and with Brexit now a reality, it is time to ask why the UK keeps getting it wrong.

History

1  An article by the author published in 2017, “Too much information: when the UK gets it wrong”[1] (“the 2017 article”), traced the genesis of automatic exchange of information in tax matters and public registers of beneficial ownership and considered the role played by the United Kingdom in developing and implementing those rules.

2  Under automatic exchange of information, extensive personal data[2] and the financial details[3] of bank accounts held abroad are processed by financial institutions and exchanged between tax authorities.

3  The US was the first country to introduce automatic exchange of information in 2010, with the enactment of the Foreign Accounts Tax Compliance Act (“FATCA”),[4] which was extended to foreign countries through bilateral inter-governmental agreements (“IGAs”).

4  In 2009, the G-20, which met in London at the behest of Gordon Brown, the UK Prime Minister, to stimulate the world economy following the credit crunch of 2006–2007, asked the OECD to develop an international system of automatic exchange of information modelled on FATCA.[5] Under the UK’s leadership,[6] between 2009 and 2014, the OECD developed the Common Reporting Standard (“CRS”), which has now been implemented in over 100 jurisdictions.

5  In addition, the UK led the way towards the introduction of public registers of beneficial ownership. On 25 June 2014, a Bill laid before Parliament mentioned the introduction of registers of People with Significant Control (“PSC”).[7] The PSC registers[8] became a reality on 5 April 2016.[9] Barely a week later, on 13 April 2016, the UK announced the conclusion of agreements with Guernsey,[10] Jersey,[11] and the Isle of Man[12] for the sharing of beneficial ownership information. The following day, on 14 April 2016, George Osborne, UK Chancellor of the Exchequer, alongside his G-5 counterparts, wrote a letter to the G-20 asking for the introduction of the international linking of beneficial ownership registers.[13] One week later, the introduction of beneficial ownership registers became EU policy.[14] Public registers of beneficial ownership are now a reality across the EU, following the adoption of the Fifth EU Anti-Money Laundering Directive[15] on 30 May 2018, which had to be transposed by 10 January 2020.

6  The UK was also the first country to sign an IGA with the US to implement FATCA. It did so on 12 September 2012, barely two months after the EU data protection working party had issued a negative opinion criticising the excessive nature of FATCA[16] (further negative opinions were published by the working party as well as the European Data Protection Supervisor in 2015 and 2016).[17]

7  Whilst the international community has embraced tax transparency,[18] the evidence discussed in the previous article demonstrates that the UK has been at the forefront of the campaign towards transparency.

Edward Snowden and the GDPR

8  When FATCA, the CRS and beneficial ownership registers were first rolled out, it appeared that the race towards total transparency was unstoppable.

9  However, following the introduction of the General Data Protection Regulation (“GDPR”) in 2018 “to give citizens back control over their data” following Edward Snowden’s revelations,[19] several legal challenges have been filed against the disproportionate nature of FATCA and the CRS as well as public registers of beneficial ownership. These challenges are summarised in the first part of this article, where the implications for the Crown Dependencies are also considered.

10  As these legal challenges are the direct result of ill-conceived policies promoted by the UK, in the second part consideration turns to why the UK got it so wrong.

11  The UK’s drive towards total transparency is all the more baffling, as the UK was a leading force behind the development and enactment of the European Convention on Human Rights (“ECHR”). Indeed, an analysis of electoral manifestos shows that it was not until 2010 that the government of the day declared open season on the ECHR, as well as the EU Charter of Fundamental Rights (“the Charter”). Following the government’s double defeat before the UK Supreme Court in the context of Brexit, judicial review is also under attack.

12  Why then, have recent UK governments changed course? The answer is complex. In addition to the politics of Brexit, which have plunged the UK into constitutional crises, there are other important factors at play, such as the winner-takes-all system of government which also requires charisma from its leader. In turn, depending on the personality of the leader, this may easily give way to populism and a feeling of annoyance towards those who wish to bring the government to account for its mistakes. It also stands to reason that 20th-century history may have had an influence on the perception of human rights in continental Europe (where people were exposed to the idea that the enemy is within) and the UK (which has tended to fight external enemies).

13  The conclusion reached is that, when it comes to human rights, the UK got it right until c. 2010, down to some curious examples (CCTVs and identity cards). However, recent UK governments got it all wrong. Against this backdrop, it is submitted that concerned practitioners must step up to the plate and continue the fight to raise awareness over the incompatibility of total transparency with fundamental rights and British values.

Beneficial ownership registers—EU challenge

14  Following a number of appeals, including from the author’s own firm Mishcon de Reya (“MDR”), on 13 November 2020 the Luxembourg District Court referred the question concerning the compatibility of public registers of beneficial ownership to the Court of Justice of the European Union (“CJEU”).[20] The Luxembourg courts asked the CJEU to decide whether the public nature of beneficial ownership registers is compatible with the fundamental rights to privacy and data protection, and in particular whether they are a proportionate limitation of those rights.

15  Separately, on 14 December 2020 MDR filed a GDPR complaint against the Luxembourg authorities with the National Data Protection Committee (“CNPD”) requesting a suspension of the registers pending a resolution of the case before the CJEU.

16  As the Luxembourg registers were introduced under the Fifth Anti-Money Laundering Directive, this development will have resonance across the continent.

17  This development is directly relevant for the Crown Dependencies (as well as the UK’s Overseas Territories), as they were hard pressed by the UK to make firm commitments concerning the introduction of public registers of beneficial ownership.[21] As reported in the 2017 article, the UK was the first country to introduce public registers in 2016.[22]

CRS—EU challenges

18  The compatibility of CRS with individuals’ fundamental rights is now before the Austrian[23] and German[24] courts in a case concerning an individual who lives in Austria and owns a small bank account (€40) in Germany. The courts have now to decide whether to refer the case to the CJEU. Again, the argument put forward is that, by requesting an exchange of information that is automatic, not subject to de mininis provisions and independent of any indicia of tax evasion, the CRS represents an excessive restriction of the fundamental rights to data protection and private life.

19  The claims rely heavily on the case law of the CJEU, which in a number of recent judgments has consistently confirmed the fundamental nature of human rights and the strict approach to the issue of necessity[25]—see e.g. Schrems II (at para 176):

“Derogations from and limitations on the protection of personal data must apply only in so far as is strictly necessary.

[T]he legislation in question which entails the interference must lay down clear and precise rules governing the scope and application of the measure in question and imposing minimum safeguards . . . The need for such safeguards is all the greater where personal data is subject to automated processing.”

20  Our contention is that a system of bulk information exchange that takes place automatically, without any de minimis rules and independently of any indicia of tax evasion, goes beyond what is strictly necessary to achieve the objective of fighting tax evasion.

FATCA—EU and UK challenges

21  The compatibility of FATCA with fundamental rights is also about to be tested before the courts.

22  The first case concerns a US-born British person known as “Jenny” which is at the heart of the correspondence with the EU.[26] On 11 November 2019, a GDPR complaint was filed against HMRC. This case is now set to go to court in the UK following the UK Information Commissioner’s refusal to deal with Jenny’s contention that UK FATCA represents a disproportionate violation of her fundamental right to data protection and privacy.

23  In addition, at the end of December 2020, the Association of Accidental Americans (“AAA”) wrote to the Belgian and Luxembourg authorities in what is the first step of a resolute legal action in the EU.[27]

24  These cases were preceded by a petition by a French-Irish-American citizen (known by his initials “JR”) to the European Parliament, which led to a seminal study on the GDPR’s incompatibility with FATCA,[28] as well as a resolution by the European Parliament calling on the European Commission to ensure the full protection of fundamental rights.

25  The conclusion reached in the study from the European Parliament could not be clearer:

“Obviously there is a tension between the right of taxpayers to the protection of their FATCA Data and the need of tax authorities—including US tax authorities—to have access to data to enforce their tax provisions . . .

It follows that to prove that the restrictions imposed in relation to FATCA Data are justified under the GDPR, the following requirements must be met [notably that] such restrictions are a necessary and proportionate measure in a democratic society.

In this respect there are certain critical indicators of the lack of these requirements in current FATCA practice. First, US expatriates generally do not use the EU financial system to engage in offshore tax evasion. Second, FATCA does not request the indicia of unlawful behaviour of taxpayers . . . Finally, most of the non-resident US persons falling under FATCA do not effectively owe US taxes. . .

In conclusion, FATCA restrictions operating within the EU through IGAs at the current stage appear to be neither proportionate, nor necessary in so far as they fail to narrow down the reporting obligations to individuals suspected of tax evasion.”

26  Jenny and the AAA have also filed individual complaints with the European Commission asking the Commission to initiate infringement proceedings against EU Member States for entering into bilateral FATCA agreements (known as “IGAs”) with the US despite early warnings from the Commission that FATCA raised complex data protection issues (as discussed in correspondence with the EU).

27  Given the potential repercussions of Brexit for Jenny’s complaint, in December 2020 JR (the EU petitioner) added his name to Jenny’s complaint before the Commission.

Implications for the Crown Dependencies

28  Although there is yet to be any litigation in the Crown Dependencies, the litigation against the excessive nature of FATCA, the CRS and the public registers of beneficial ownership has direct implications for Jersey, Guernsey and the Isle of Man.

29  All three jurisdictions introduced Human Rights legislation at the turn of the century incorporating the ECHR into domestic law.

30  These Laws[29] provide that:

“So far as it is possible to do so, principal legislation and subordinate legislation must be read and given effect in a way which is compatible with Convention rights.”

“If in any proceedings . . . the court is satisfied that [a provision of principal legislation] is not compatible [with a Convention right], it may make a declaration of incompatibility.”

31  The ECHR, at art 8, provides that the right to private life is a fundamental right and that:

“There shall be no interference by a public authority with the exercise of this right except such as is in accordance with the law and is necessary in a democratic society . . . for the prevention of . . . crime.”

32  Transparency measures raise the question of necessity. As the Luxembourg Court of Appeal stated in a recent judgment about FATCA:[30]

“The protection of individuals in relation to the treatment of their personal data is a fundamental right . . .

Accordingly, the prohibition to divulge personal data represents the rule, and the divulgation of personal data the exception . . .”

33  And in a recent opinion on central bank account registers (which extend FATCA and the CRS to domestic accounts), the Belgian national data protection authority stated:[31]

“The draft law introduces the obligation, for Financial Institutions, to communicate bank account balances to a central register [which] can be consulted by the tax authorities . . .

Article 5.1(c) GDPR requires that personal data shall be adequate, relevant and limited to what is necessary in relation to the purposes for which they are processed (‘data minimisation’).

The new obligations would require the periodic disclosure of bank account balances.

The draft law gives rise to an unnecessary, substantial and risky centralisation of financial (personal) data, which is not proportionate to the purposes pursued . . .

We conclude that the draft law does not sufficiently demonstrate how the compulsory communication of periodic bank account balances contributes, let alone is necessary, to the achievement of the purposes of the proposed data processing.”

Why has the UK got it so wrong?

34  The 2017 article showed how the race towards transparency was effectively a UK idea, partly as a result of the partnership with the US in the field of mass surveillance, and partly in response to domestic political concerns.

35  Three years on, the question is why has the UK government got it so wrong?

36  This is not an easy question to answer. There are several factors at play and this article focuses on what are perceived to be the main ones.

37  As litigation is ongoing, definitive statements must be avoided. However, as a Swiss lawyer turned English solicitor almost 20 years ago, the author has been reflecting at length on the seeming disconnect between the policies advanced by successive UK governments and the fundamental values enshrined in a human rights convention that was introduced in the immediate aftermath of the Holocaust and the European continent’s descent into madness.

38  The answer is made more complex by the UK’s decisive role in ending the madness of fascism in Western Europe and keeping the new madness of Stalinist communism at bay (Stalin died in 1953, three years after the adoption of the ECHR).

The UK as a driving force behind the ECHR

39  It was Churchill who, in an address given at the Congress of Europe in The Hague on 7 May 1948, hailed the introduction of a European Charter of Human Rights, whilst calling for closer political unity:[32]

“The Movement for European Unity must be a positive force, deriving its strength from our sense of common spiritual values . . .

In the centre of our movement stands the idea of a Charter of Human Rights, guarded by freedom and sustained by law. It is impossible to separate economics and defence from the general political structure.

Mutual aid in the economic field and joint military defence must inevitably be accompanied step by step with a parallel policy of closer political unity.”

40  Previously, in a speech delivered before the House of Commons on 16 August 1945 (notable also for the first reference to the “iron curtain”),[33] Churchill referred to individuals’ fundamental rights:

“It is . . . for the fundamental rights of man, now menaced and precarious in so many lands, that peoples tremble.”

41  Historical documents also show that the ECHR was co-drafted by Sir David Maxwell Fyfe, a British Conservative politician, lawyer and judge[34] and although tensions grew within Anthony Eden’s government after the fall of Churchill,[35] the UK became the first country to ratify the ECHR, albeit without opting to accept the jurisdiction of the European Court of Human Rights (“ECtHR”) and the right of individual petition. However, when sufficient signatories triggered the establishment of the ECtHR in 1959, Lord McNair, a British judge, became its first President.[36]

42  Statistics released by the ECtHR show that of the more than 21,500 judgments handed down since 1959, only 2.36% of cases decided since 1959 relate to the UK. This is just over half of the cases relating to France (4.68%) and a fraction of the cases relating to Italy (11.55%).[37]

Political backlash (Brexit)—“enemies of the people”

43  Following the UK High Court’s decision in the first Gina Miller case, on 4 November 2016 the Daily Mail ran a strongly worded article with the following headline:[38]

“Enemies of the people: Fury over ‘out of touch’ judges who have ‘declared war on democracy’ by defying 17.4m Brexit voters and who could trigger constitutional crisis.”

44  Those who remember the vitriolic nature of the political debate surrounding Brexit will understand the political sentiment of the Daily Mail, but from a legal perspective, it is difficult to see how the High Court was acting against democratic principles.

45  The High Court merely ruled that Brexit could not be triggered without a vote from Parliament, which in a country obsessed with the principle of “Parliamentary sovereignty”[39] should have been greeted as obvious. Indeed, in 2010 (i.e. six years before the Brexit referendum), the UK Parliament’s Constitution Committee held that:[40]

“because of the sovereignty of Parliament, referendums cannot be legally binding in the UK, and are therefore advisory. However, it would be difficult for Parliament to ignore a decisive expression of public opinion.”

46  This is not an article about Brexit. That debate has long been resolved. For the purposes of this article, what the proceedings leading to the UK’s withdrawal from the EU reveal is the UK government’s approach to scrutiny, be it from Parliament, judges or ordinary citizens asserting that their fundamental rights have been violated.

47  Although UK constitutional lawyers (and Parliament itself)[41] will assert the importance of Parliamentary sovereignty, at the heart of the constitutional crises lay the government’s power to set the Parliament’s agenda.

48  This gives the executive an opportunity to control what gets voted on and to steer policy outcomes. During the Brexit crises, Parliament had to fight very hard to “take control over the order paper”. The difficulties are evident in an insight document published at the time by the House of Commons Library, which asked: “Why is it difficult to take control over the order paper?”[42]

49  The executive’s effective control over Parliament’s business was evident on a number of occasions during the recent constitutional crises.[43]

50  Thus, on 10 December 2018, the then UK Prime Minister (Theresa May) was able to remove the approval of the agreement she had negotiated with the EU from the agenda of Parliament.[44] The then Speaker of the House described the move as “deeply discourteous”[45] before a packed House of Commons, although he also told MPs that he had no power to compel ministers to table an item[46] (although Parliament was able to pass a motion of contempt against the government for not disclosing a legal opinion concerning the beleaguered EU Withdrawal Agreement).[47]

51  Then, on 21 October 2019, Mrs May’s successor (Boris Johnson) threatened to remove a meaningful vote if the Speaker of the House (John Bercow) selected any amendments, which would make it non-binding.[48] This demonstrated the government’s ability to influence parliamentary business, although during the constitutional crises Parliament was able to find ways to take back control, as it did on 4 September 2019).[49]

52  As is well known, in the face of opposition from Parliament, Mr Johnson moved to “prorogue” (i.e. suspend) Parliament, diminishing its role, which later led to a rebuke from the Supreme Court.

53  More recently, the UK government declared its intention to submit legislation that would break international law,[50] again triggering a showdown with Parliament, which voted on legislation[51] introduced by two MPs via a relatively unusual route (a Private Members’ Bill, also known as “backbench legislation”).[52]

Parliament

54  Whilst tabloid newspapers made much of judges being “enemies of the people”, the political wrangling surrounding Brexit makes it clear that this UK government is not partial to scrutiny, whether from judges, Parliament or individuals.

55  The fraught relationship between the executive and Parliament in the UK—at least in a time of crisis—has already been described. On 54 September 2020, the Financial Times published an opinion with the following headline and main content:[53]

“The UK’s constitution is not working

When there is no proper accountability and transparency, government policymaking becomes sloppy . . .

Brexit and now the response to the Covid-19 pandemic have revealed many structural weaknesses of the British state. There may not (yet) have been a crisis but the constitution of the country is in a damaged and precarious condition . . .

From the summer’s A-level fiasco and the botched procurement of health equipment, to the current failure of the testing regime and confusion about the trade implications of Brexit, the general condition of British public policymaking is appalling . . .

Ministers and their advisers want more unchecked power but the executive is not competent at using the powers that it has. The ongoing assault on an impartial civil service and diplomatic corps—like its loud complaints about pesky ‘activist lawyers’ who act in judicial review challenges to government decisions—is not based on the superior performance of the executive function of the British state.”

The courts

56  It has already been seen how the first judgment from the High Court in the Brexit saga led to headlines branding the judges as “enemies of the people”.

57  However, following the defeat before the Supreme Court in relation to the prorogation of Parliament, the tone previously set by a tabloid was adopted by other parts of the media and think tanks close to the government.

58  Thus, for example, on 25 September 2019, the Constitutional Law Association published a piece with the following main message:[54]

“Supreme Court Against the People

This post argues that the Court acted in a partisan fashion as if it were the legal wing of Remain, and that as a result the judiciary now needs to have its wings clipped.

The justices of the Supreme Court are well-to-do. They have the same class interest in continued EU membership as do Britain’s upper-middle class generally. But they have additional compelling reasons to frustrate Brexit, above and beyond their membership of the privileged social class. European integration has meant ‘plain and simple judicial empowerment.’”

59  In another example of the “enemy of the government” sentiment, on 7 February 2020, The Daily Telegraph ran an article entitled:[55]

“Fixing the Supreme Court should be Boris Johnson’s constitutional priority.”

Activist individuals (including Jenny)

60  It would be difficult to assess the current political debate concerning human rights in the UK without mentioning the increased relevance of judicial review. As is well known, the current UK government succumbed twice to judicial review in the context of Brexit, in the litigation brought by Gina Miller first against Mrs May’s decision to write directly to the EU (bypassing Parliament),[56] and then against Mr Johnson’s decision to prorogue Parliament.[57]

61  Individuals could always bring their case to the EctHR.[58] What changed with the Human Rights Act 1998 was the ability to bring cases alleging violation before domestic courts in the UK.

62  Like a claim under the ECHR, judicial review enables individuals to question the lawfulness of a decision or action made by a public body.[59] This is the means by which the courts may control the abuse of governmental power.

63  Judicial review is closely aligned with securing the rule of law. Lord Hoffmann stated in R (Alconbury) v Secy of State for the Environment, Transport and the Regions [2001] UKHL 23 (at para 73):[60]

“The principles of judicial review give effect to the rule of law. They ensure that administrative decisions will be taken rationally in accordance with a fair procedure and within the powers conferred by Parliament.”

64  Over the past few decades, the UK courts have adopted an increasingly assertive role in the context of judicial review, confirming, for example, that the exercise of the Royal prerogative[61] was subject to judicial review, just like the enactment of statutory instruments.[62]

65  Then came the backlash, both in relation to Brexit and asylum policy. On 4 October 2020, the Home Secretary, Priti Patel, delivered a keynote speech at the virtual Conservative Party conference in which she blamed the failings of the UK asylum system on the number of legal challenges brought asylum seekers. Whilst the political and social challenges brought by immigration are well-known and shared by many segments of the population, the Home Secretary took the unprecedented step of attacking the legal profession:[63]

“And no doubt, those who are well-rehearsed in how to play and profit from the broken system will lecture us on their grand theories about human rights . . . and for those who defend the broken system, the traffickers, the do-gooders, the lefty lawyers, the Labour Party, they are defending the indefensible . . .”

66  The Home Secretary’s speech led to the following rebuke from the President of the Law Society:[64]

“Attacks on members of the legal profession for doing their jobs do our country no credit. Government ministers must be unequivocal in their support for the rule of law.”

67  This sentiment was echoed by the Chair of the Bar Council:[65]

“It is not the job of lawyers to limit Parliament’s own laws in a way that the government of the day finds most favourable to its political agenda. The law, not politics, is what matters to a profession that upholds the rule of law.”

68  The UK government’s dislike for those who seek to take the executive to task goes beyond the politically charged realm of asylum policies.

69  Thus, in the challenge against FATCA in the UK, Her Majesty’s Revenue and Customs (“HMRC”) refused to waive Jenny’s adverse party costs risk on the bases that a challenge based on human rights is “groundless and in large part comprises an abuse of process”. In pre-trial correspondence, HMRC also stated that “no court would make an order which would require HMRC to act unlawfully” (i.e. in breach of its obligations under the US–UK intergovernmental agreement).

Human rights—hostage of 21st century UK politics

70  The 2017 article showed how the drive towards tax transparency was largely due to UK politics involving the government of the day. The same comment applies to the current drive to curtail human rights and judicial review.

EU Charter of Fundamental Rights—victim of Brexit

71  In order to prevent a legal vacuum resulting from the withdrawal of EU law, the EU Withdrawal Act 2018 provides that EU law will remain in force in the UK, albeit as UK domestic law.[66]

72  The concept of “retained EU law” will ensure continuity, whilst enabling the UK government to depart from existing EU law in the future.

73  Amongst the few statutory exceptions, one can find the EU Charter of Fundamental Rights (“the Charter”). Section 5(4) of the EU Withdrawal Act provides as follows:

“5 Exceptions to savings and incorporation

(4) The Charter of Fundamental Rights is not part of domestic law on or after exit day.”

74  At the time, Mrs May’s government stated that the reason for not retaining the Charter was a mere technicality, because her government’s view was that the Charter did not create new rights.

75  However, during the legislative process surrounding debate on the EU Withdrawal Act the government’s bluff was called. Thus, for example, an insight document published by the House of Commons Library stated as follows:[67]

“Brexit could affect the protection of human rights in the UK due to the decision to stop the EU Charter of Fundamental Rights having effect after the UK leaves the EU.

When the [EU Withdrawal] Bill was going through Parliament, the Government gave assurances there would be no reduction in rights as a result. It published a ‘right by right analysis’ which sought to identify other sources for the rights conferred by the Charter.

Commentators at the time, including the Joint Committee on Human Rights and the Equality and Human Rights Commission, questioned this assertion. It was noted that the Charter enables individuals to bring legal action to strike down domestic legislation that is incompatible with a fundamental right, which is not possible under the ECHR.”

76  In addition, the Charter contains a fundamental right to data protection, which is in addition to, i.e. separate and independent from, the right to private life, to reflect the fact that the Charter was adopted in 2000, when the Internet (and therefore the digital economy) was coming of age.

77  An enquiry report from the UK Parliament’s European Scrutiny Committee in 2014, discussing the scope of the Charter under UK law, is of interest:[68]

“The application of the Charter in the UK—a state of confusion

. . . In 2013, an article appeared in the London Evening Standard, reporting that a High Court judge, Mostyn J., had commented on how the Charter of Fundamental Rights, which included rights that go beyond rights protected in the ECHR, was now legally binding in the UK.

. . . The Secretary of State for Justice [in David Cameron’s government] (Rt Hon Chris Grayling) responded to the article in the next edition of the same paper, clarifying that:

‘The Charter is now very much a part of our law . . . It should only apply when European law applies within the UK. But last week’s ruling suggests the possibility of something more than that. I am determined that we challenge this idea and will seek to do so in our courts as soon as possible.’

. . . There is in fact no doubt that the legal force of the Charter extends to UK law, as we conclude later in the Report. We look forward to seeing how the Government intends to clarify through litigation that there is no such link.”

78  The Charter has now lost its place as “retained EU law”.

David Cameron starts the assault on the ECHR

79  It has been stated that the UK was one of the driving forces behind the development of a European convention on human rights.

80  In Mrs May’s case, dislike of a European human rights framework preceded Brexit and goes back to her first days as a government minister in 2010. However, it is important to note that for the Conservative Party it was not always so.

81  Margaret Thatcher’s 1979 Conservative Manifesto[69] shows that the ECHR was not a great concern. It merely attracted a brief mention of a possible Bill of Rights, without much flesh on the bones:

“1979 Conservative Party General Election Manifesto

. . . There are other important matters, such as a possible Bill of Rights, the use of referendums, and the relationship between Members of the European Parliament and Westminster, which we shall wish to discuss with all parties.”

82  There was no mention of the ECHR or a UK Bill of Rights in Mrs Thatcher’s manifestos of 1983 and 1987, or in John Major’s manifestos of 1992 and 1997 (the year of Tony Blair’s landslide election).

83  On the contrary, Mrs Thatcher’s 1983 manifesto[70] is indicative of successive Conservative governments’ commitment to a European human rights framework: for example,

“1983 Conservative Party General Election Manifesto

. . . The provisions of our Data Protection Bill will meet public concern that computers pose a particular threat to privacy, and will enable us to ratify the European Convention on Data Protection.”

84  Similarly, the manifestos of Mrs Thatcher in 1987 and Mr Major in 1992 hailed Britain’s leadership role in promoting an international version of human rights steeped in the Cold War:

“1987 Conservative manifesto

. . . Britain is playing a major part on the international stage. From the White House through Europe to the Kremlin our voice is heard on arms control, on East-West issues, on human rights, on the Middle East and on African affairs.

. . . The Prime Minister’s historic visit to Moscow was a major contribution to this. We shall welcome any move by the Soviet Union towards respect for basic human rights.”

“1992 Conservative manifesto

. . . Communism has collapsed in Eastern Europe, and the Soviet Union has fallen apart. Everywhere Socialism is in retreat and democracy, human rights and market economics are advancing. 

. . . We will use overseas aid to promote . . . respect for human rights and the rule of law.”

85  The Human Rights Act was introduced in 1998, following a promise in Tony Blair’s 1997 Labour Manifesto:[71]

“New Labour Manifesto 1997

. . . Real rights for citizens

Citizens should have statutory rights to enforce their human rights in the UK courts. We will by statute incorporate the European Convention on Human Rights into UK law to bring these rights home and allow our people access to them in their national courts. The incorporation of the European Convention will establish a floor, not a ceiling, for human rights. Parliament will remain free to enhance these rights, for example by a Freedom of Information Act.”

86  Hostilities against the ECHR first broke out in 2010, when Mr Cameron’s government came to power. The 2010 Conservative Manifesto[72] elaborated as follows:

“The Conservative Manifesto 2010

. . . Protect our freedoms

Labour’s approach to our personal privacy is the worst of all worlds—intrusive, ineffective and enormously expensive. We will scrap ID cards, the National Identity Register and the Contactpoint database. To protect our freedoms from state encroachment and encourage greater social responsibility, we will replace the Human Rights Act with a UK Bill of Rights.”

87  It is perhaps ironic that the assault on the ECHR was brought under the banner of improving privacy and “protecting our freedoms from state encroachment”, given that Mr Cameron’s government had led an onslaught on the right to privacy, as discussed in the 2017 article.

88  In particular, although tax transparency had been on the agenda of the Labour Party, the SNP and the Liberal Democrats, it was Mr Cameron’s government that signed up to the first IGA in September 2012 despite the negative opinion expressed by the European Data Protection Working Party.

89  In addition, it was Mr Cameron’s government which laid the Small Business, Enterprise and Employment Bill (which provided for the introduction of PSC registers) before Parliament in 2014. It was his government which extracted the exchanges of notes from the Crown Dependencies on 13 April 2016 and wrote to the G-20 the following day demanding the introduction of inter-linked registers of beneficial ownership registers internationally.

90  Mr Cameron’s commitment to transparency was evident during Prime Minister’s Questions on 13 April 2016 mentioned in the 2017 article:

“We should bring some consensus to this issue. For years in this country, Labour governments and Conservative governments had an attitude to the Crown Dependencies and the Overseas Territories that their tax affairs were a matter for them and their compliance affairs were a matter for them, and that their transparency was a matter for them. This government has changed that! We got the Overseas Territories, we got the Crown Dependencies round the table. We said you’ve got to have registers of ownership, you’ve got to collaborate with the UK government, you’ve got to make sure people don’t hide their taxes, and it’s happening. So when he [Corbyn] gets to his feet he should welcome the fact that huge progress has been made, raising taxes, sorting out the Overseas Territories and Crown Dependencies, closing the tax gap, getting businesses to pay more, giving international leadership to this whole issue, all of which has never happened under Labour.”

91  Throughout this period, little thought was given to the fundamental rights to private life and data protection, as evidenced by the disregard of the opinion of the EU data protection authorities in relation to FATCA agreements in the first opinion dated 21 June 2012:[73]

“FATCA must be mutually recognised as necessary from an EU perspective. This requires ensuring that . . . the EU’s fundamental right enshrined in Article 8 of the Charter of Fundamental Rights—the right to a private and family life, i.e. by demonstrating necessity by proving that the required data are the minimum necessary in relation to the purpose.

A bulk transfer and the screening of all these data is not the best way to achieve such a goal.

Therefore more selective, less broad measures should be considered in order to respect the privacy of law-abiding citizens, particularly; an examination of alternative, less privacy-intrusive means must to be carried out to demonstrate FATCA’s necessity.”

92  Two months later, Mr Cameron’s government signed the first IGA with the US.

93  Documents from the European Commission show that, between 2010 and 2012, the European Commission had been in active negotiations with the US to address “worrying” data protection concerns.[74]

94  The evidence includes a note written for Commissioner Barnier by the EU’s department of justice ahead of a meeting with the US Treasury on 28 November 2011 confirming the EU’s data protection concerns:

“Our data protection experts . . . believe that the US data protection rules do not offer the same standard of protection as EU data protection rules.”[75]

95  An email sent on 12 September 2011[76] explained:

“We wish to ensure that FATCA does not conflict with . . . data protection. It is for this reason that the European Commission together with the Presidency and some EU Member States, is currently engaged in a dialogue with the US . . .

While we see it unlikely that FATCA will be repealed, the Commission hopes that it may be possible to work out solutions that would make FATCA more proportionate and workable.”

96  And in an email dated 12 April 2012 the Commission confirmed that:

“Following an in-house examination with data protection experts, the Commission referred this topic to the Member States’ Data Protection Authorities (who meet in the Article 29 Working party).

This Working Party is currently working on an opinion on the interaction between FATCA and EU data protection rules which is expected to be finalised in early May [2012].”

97  That opinion was issued on 21 June 2012. As mentioned above, it contained a negative assessment of FATCA.

98  Two months later, Mr Cameron’s government signed the first IGA with the US, forcing the EU to abandon its previous approach and opening the floodgates of IGAs.[77]

99  The UK government’s disregard for the opinion of the EU Data Protection Working Party in relation to FATCA, and the introduction of public registers of beneficial ownership in 2016, are indicative of a poor level of understanding of the fundamental rights contained in the Charter and the ECHR.

100  As regards the Charter, this poor state of affairs was confirmed in a report published by the European Select Committee on 26 March 2014 (discussed more in detail below):[78]

“Application of the Charter in the UK: a state of confusion

. . . both this and the previous Government bear some responsibility, we suggest, for the fact that the Charter is still so badly misunderstood: its domestic legal effect has never been clearly and fully communicated, unlike the introduction of the Human Rights Act 1998, by contrast.”

101  Turning to the ECHR, it will be recalled that Mr Cameron’s 2010 electoral manifesto called for the repeal of the Human Rights Act (which incorporated the ECHR into UK domestic law) and the introduction of a “UK Bill of Rights”.

102  The assault on the ECHR was mentioned in a Research Report published by the Equality and Human Rights Commission in 2012:[79]

“Attitudes towards the HRA

Much media reporting and political commentary about the HRA suggests that it is unpopular with the UK public. However, the evidence should not be misconstrued and has sometimes been overstated. A survey commissioned by the Ministry of Justice (2008: 47) found that 84 per cent of the public ‘feel we need to have a law dealing with Human Rights in Britain’.

Proposals for a UK Bill of Rights

The UK coalition parties entered the 2010 general election with divergent positions on human rights. The Conservatives pledged to repeal the HRA and replace it with a UK Bill of Rights, without expressly committing to an alternative mechanism for incorporating the ECHR into domestic law. The Liberal Democrats were committed to the HRA, as was Labour.”

103  The executive summary outlines the concerns of the Equality and Human Rights Commission in the following terms:

“Protection of human rights in the UK

. . . The Commission on a Bill of Rights is due to report in 2012 on options for creating a new UK Bill of Rights ‘that incorporates and builds on’ the UK’s obligations under the ECHR. However, significant obstacles exist in relation to this process which may undermine it reaching an outcome which enjoys democratic legitimacy. Furthermore, any reform of human rights law will be complicated by the devolution settlements, of which the HRA and ECHR are an integral part.”

104  But it is not all Mr Cameron’s fault. UK approaches to acquiring masses of information for tax purposes pre-date 2010. HMRC has been a keen supporter of “disclosure notices” against financial institutions[80] and the introduction of disclosure rules for tax avoidance schemes (“DOTAS”) which were introduced in 2004,[81] and which therefore predate the EU mandatory disclosure rules (“DAC6”)[82] by over a decade.

105  The debate about tax transparency in the UK has even raised questions about the scope and limits of legal professional privilege.[83]

106  As far as transparency goes, the UK has been a leading force in the EU, eventually leading to a clash between transparency and privacy that will be addressed by the courts as a result of the various legal challenges mentioned at the beginning of this article.

107  In the light of the UK’s leading role in the development and adoption of the ECHR, and previous Conservative governments’ long-standing commitment to human rights, why have recent UK governments changed direction?

108  The answer to why the UK led the charge on FATCA, the CRS and public registers of beneficial ownership registers, sometimes against the clear advice of European data protection authorities, is complex and multi-factorial.

Poor understanding of the Charter

109  A poor understanding of the EU Charter of fundamental rights in the UK is one factor.

110  Politics is another.

UK politics

111  As explained in the 2017 article, after Mr Cameron found himself embroiled in the Panama Papers scandal, his response was to push the accelerator on transparency.

112  Then there is Euroscepticism. Ever since Mrs Thatcher’s Bruges speech[84] and her famous “No, No, No” rebuke of Jacques Delors,[85] the Conservative Party has been plagued by the question of Europe. Mr Cameron’s manifesto of 2010 pledged a repeal of the Human Rights Act 1998 with a UK Bill of Rights.

113  Both Mr Cameron and Mrs May lost their jobs over Europe, and the current Prime Minister was catapulted to power by his anti-EU message. As far as Eurosceptics go, the ECHR has a problem in that it is contains the word “European”.

114  However, Euroscepticism and Brexit are not sufficient to explain the constant onslaught on the ECHR by three successive Conservative governments since 2010.

The winner takes all

115  The “first past the post” system, which in most cases leads to a single party majority in Parliament sharing the same political colour as the government, is part of the problem. In the UK, coalitions are the exception. In the 20th century, there have only been a handful of cases of a hung parliament.[86]

116  By contrast, continental European countries tend to have coalition governments and “multi-colour” parliaments which are made possible by the application of a proportional electoral system. A recent article in The Economist summarised the differences well:

“Sprechen Sie Tory?

Why Conservatives and Christian Democrats never understood each other

. . . These two philosophies have much in common. They both sit on the centre-right as natural parties of government, with reputations for fiscal prudence . . .

Open your eyes fully, however, and the differences became clear . . .

Even the preferred methods of politics clash. The slow, grinding consensus-building at the heart of Christian Democracy and consequently the EU itself, is anathema to Conservatives, for whom the term sounds too much like capitulation. Compared with the winner-takes-all system of British politics, the workings of the EU seem slow and unresponsive to Conservative eyes: ‘Merkel is no Thatcher’, wrote Mr Cameron. ‘Her favourite expression is “step-by-step”’. By contrast, the Conservative Party has a distinctively unconservative lust for creative destruction. Brexit, a project that radically overhauls the state, is simply the latest example . . .”

Useful charisma—and dangerous populism

117  The “Sprechen Sie Tory” piece in The Economist defines the issue of charisma as follows:

“Even the presentation of these policies is different. Dullness is a virtue for Christian Democrats. Angela Merkel is far from the first Christian Democrat to revel in anti-charisma. For Mr Johnson, charisma is his main weapon.”

118  In a system of government where the winner takes all, the charisma of the Prime Minister carries weight, especially in the televised spectacle that is Prime Minister’s Questions, where the Prime Minister and the Leader of the Opposition spar, supported by the vociferous support of their MPs—a grandiose spectacle for continental Europeans, so used to their civilised (as well as dull) parliamentary debates.

119  The other side of the charisma coin, in the absence of the restraining power of coalition partners, is the risk of unchecked populism.

120  The problem was aptly summarised by Gideon Rachman in The Financial Times on 22 July 2019:[87]

“Donald Trump, Boris Johnson and lessons from the 1930s

. . . Then, as now, political moderates were constantly having to ask the question, how serious is this? Is it just distasteful or is it truly dangerous? And is the right response to plunge into politics or to retreat into private life? . . .

The complaints by today’s populists that a ‘deep state’ in the US and Britain is thwarting the will of the people is reminiscent of [Sebastian] Haffner’s description of the far-right in Germany in the 1920s [in his memoir, Defying Hitler] . . .

My instinctive reaction to the rise of Mr Johnson and the rhetoric of Mr Trump is still ‘calm scepticism’. But then again, I’m at roughly the same stage of life as Haffner’s father was in 1933.”

121  It is therefore alarming that, following its recent defeat at the hands of the Supreme Court, the UK government set out to “clip the wings” of the judiciary.

122  On 7 December 2020, it was reported that Mr Johnson’s government appointed Sir Peter Gross, a former Court of Appeal judge “to examine how the Human Rights Act is operating 20 years it was passed into law”.[88]

123  According to an article in The Financial Times, “critics have called the process a government ploy to limit people’s ability to challenge the state”.[89]

124  Previously, on 7 September 2020, the Ministry of Justice’s Independent Review of Administrative Law Panel issued a call for evidence on the following question:[90]

“Does judicial review strike the right balance between enabling citizens to challenge the lawfulness of government action and allowing the executive and local authorities to carry on the business of government?”

125  The process is still ongoing, but a response was filed by MDR on 30 October 2020,[91] which contains the following:

“We do not support proposals that would make it harder for individuals to bring judicial review claims, and note that there already exist a number of safeguards in the judicial review procedure for deterring unmeritorious claims including strict time limits and the requirement for permission.”

126  It would be wrong to assume that, as things stand, judicial review is a remedy easily obtained. One of the difficulties of bringing a judicial review against the Information Commissioner’s decision on Jenny’s complaint against FATCA[92] was represented by the prohibitive costs of litigation in the UK.

127  If the UK government has it its way, it will in future be even more difficult to obtain judicial review, or to rely on the ECHR to contest human rights violations by UK public authorities.

Continental Europe—the enemy within

128  Ever since the end of WWII, continental Europeans have been concerned about the enemy within. Germans and Italians cannot point the finger of blame at outsiders for the early 20th century descent of their countries into madness.

129  The emergence of far-left terrorists such as the Italian Red Brigades or the German Red Army Faction (RAF) is another example of enemies within. According to some accounts, the kidnapping and killing of Italian Prime Minister Aldo Moro in 1978 was designed to incite a popular revolution.[93] Similarly, the ideologues of the RAF demanded a left-wing revolution to overthrow the capitalist West German state and advocated a campaign of violence to achieve it.[94]

130  At the time of the review of the Investigatory Powers Act following the revelations from Edward Snowden, the UK Parliament’s Joint Human Rights Committee^[95] reminded legislators of Europe’s recent history:

“There are judges from Germany and countries of eastern Europe who had a rather different experience in the 20th century and who are more privacy-minded and less inclined to tolerate these powers than people are here.”

131  The opinion from the EU’s Attorney General (Denmark’s Henrik Saugmandsgaard Øe) in the recent case brought by a Swedish telecom company and two UK MPs (the Conservative David Davis and Labour’s Tom Watson) against the Swedish and UK data retention laws[96] is a classic example of the suspicious approach of continental Europeans towards public authorities:

“In 1788, James Madison, one of the authors of the United States Constitution, wrote: ‘If men were angels, no government would be necessary. If angels were to govern men, neither external nor internal controls on government would be necessary . . .

The retention of communications data enables ‘the government to control the governed’ . . . However, on the other hand, it is imperative to ‘oblige [the government] to control itself’, with respect to both the retention of data and access to the data retained, given the grave risks engendered by the existence of databases which encompass all communications made within the national territory.”

The UK—the enemy without

132  In the UK, enemies tend to come from outside, leading to a benign view of government, which is generally seen as being on the side of ordinary citizens, or even below them.[97] The UK’s heroic struggle against Germany during WWII is a prime example of the enemy without. After the evacuation of Dunkirk, Churchill gave his famous “we shall fight on the beaches” speech on 4 June 1940,[98] immortalising the notions of the state and citizens together against a common enemy, and “keep calm and carry on” in the psyche of the British, as well as Anglophiles around the world.

133  British parliamentary dynamics are another example of the “enemy without”. The Prime Minister and the Leader of the Opposition and their respective parties sit opposite each other, divided by red lines (traditionally supposed to be two sword-lengths apart),[99] confronting each other and, typically, criticising each other, rather than consensus-building. Prime Ministers do not need to build consent, as they are backed by the majority of MPs, and the opposition’s “Shadow Cabinet” is ready to wrestle power from the government party at the next election.

134  Even the tragedy of terrorism in the UK can be seen as a struggle against an enemy without. Unlike the Red Brigades in Italy or the RAF in Germany, the Irish Republican Army (IRA) did not aim to cause a social revolution within the UK. The IRA’s objective was to end British rule in Northern Ireland. Of course the tragic loss of lives made the IRA’s acts of terrorism a very domestic tragedy, with terrible consequences for people in the UK. And for people in Northern Ireland at least, the enemy was very much within. However, in their minds, terrorists were fighting to end British rule in Northern Ireland and the reunify Ireland, outside of the UK.

The curious story of CCTVs and identity cards in the UK

135  The relatively relaxed acceptance of CCTVs in the UK is surprising. In 2013, research estimated their number at up to 6 million (one CCTV for every 11 people)[100] and although the issue gets routinely debated in the media,[101] with litigation against CCTVs generally[102] and face-recognition technology in particular,[103] no continental European country has the same presence of CCTVs.

136  This is not to say that British citizens are unaware of their fundamental rights, sometimes being concerned by issues that others would find uncontroversial, such as identity cards. Most continental Europeans hail the convenience of a “carry-in-your-wallet” ID which enables them to fly around Europe without a passport. The same goes for registers of inhabitants held by local authorities which make it easy to demonstrate one’s place of residence. However, in the UK, the proposed introduction of identity cards led to a rebellion[104] and a pledge contained in the 2010 Conservative Manifesto to scrap identity cards to “protect our freedoms” and in particular “our personal privacy”.

Conclusions

137  The UK is quite rightly known throughout the world for the Magna Carta and (with less factual precision) for the “mother of all parliaments”.[105] Britain’s fight against Nazism and Churchill’s support for a European Human Rights Convention show how engrained are liberal principles in the UK.

138  The other great feature is the common law system, where the courts’ influence in developing the law (especially in the area of equity) has equipped the UK with a first-class system which is above all fact-specific, and therefore fair as well as flexible.

139  The author’s research shows that recent governments have done a great deal to undermine these achievements.

140  Whilst the jury on the various legal challenges against FATCA, the CRS and public registers of beneficial ownership is still out, it is important for lawyers to enter the ring and raise awareness of the risks that current policies pose to data privacy, data security and indeed fundamental freedoms.

Filippo Noseda is a Partner at Mishcon LLP and a Visiting Professor at King’s College, London. Any views expressed herein are the author’s personal views.