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In April 2022, the findings of a Commission of Inquiry into alleged corruption and mismanagement in the British Virgin Islands (BVI) was published by the Territory’s Governor, John Rankin.

The Commission said that “almost everywhere” in BVI government the principles of openness, transparency and the rule of law were “ignored.”

The BVI is a UK Overseas Territory. This means the UK retains ultimate responsibility for its good governance and has the power to intervene in its domestic affairs. Among the Commission’s recommendations was for UK direct rule to be imposed for at least two years, with the BVI’s local assembly and ministerial government being suspended.

In June 2022, the UK Government said it would not impose direct rule at this time. It has instead accepted the proposal of the BVI Government to introduce the recommended reforms. The UK retains the right to intervene if it judges sufficient progress is not being made. It has laid legislation to this effect.

This paper sets out the Inquiry’s key findings, the response of UK and BVI officials, and the recent history of tensions between the UK and the BVI.

Commission findings and recommendation to impose UK direct rule

The Commission concluded governance in the BVI is poor. Its 49 recommendations included the dissolution of the locally elected House of Assembly and ministerial government for at least two years.

The UK-appointed Governor, potentially with a local advisory council, would instead oversee reform. The Commission also recommended an audit of public spending, with information potentially referred for criminal and civil proceedings, if deemed appropriate.

Resignation of Premier Fahie

In April 2022, BVI Premier Andrew Fahie was arrested in the United States on charges relating to drugs trafficking and money laundering. In May, he pleaded not guilty to the charges. Dr Natalio Wheatley is now Premier.

Announcing the publication of the report, the Governor said its contents and recommendations are not linked to Fahie’s arrest.

Opposition in the BVI to direct rule

Local politicians and regional organisations have opposed the recommendation to impose direct rule. Premier Wheatley has instead established a cross-party coalition to lead reform.

He proposed to the UK Government that BVI politicians work in partnership with the UK-appointed Governor to implement the necessary reforms. The UK accepted this proposal in June 2022, but will continue to monitor progress.

Wheatley has sought to demonstrate the BVI is capable of leading change and pledged to introduce reforms. These include new legislation to require all BVI politicians to publicly disclose their assets and interests.

History of BVI-UK tensions

The Commission’s findings occur within the context of recent tensions between the Territory and the UK. These centre on the degree of autonomy the UK allows for the BVI’s domestic affairs, especially in the economic sphere.

Financial services are particularly significant to the BVI’s economy, and a previous BVI Government had opposed the extension of beneficial ownership registers to the Territory. These registers are intended to promote greater transparency in who owns and controls a company or asset, helping to combat money laundering and corruption.

The BVI Government had also requested greater flexibility in its ability to borrow and spend its reserves during the Covid-19 pandemic. The UK rejected this request.

In January 2022, the BVI Government established a committee to examine whether greater powers could be devolved to it. It has recently re-iterated the Territory’s right to self-determination.

Direct rule in the Turks and Caicos Islands

The last Territory to be subject to direct rule was the Turks and Caicos Islands in 2009. This followed an uncovering of corruption and poor governance.

The planned reinstatement of local rule was delayed, however, while the UK implemented further legislation to improve the transparency of the Territory’s politics and see its public finances achieve a sustainable footing.

A new constitution for the Territory was agreed in 2011 to restore a locally elected government. The UK-appointed Governor retained power over the regulation of financial services. New local elections were held in 2012.

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