International Organisations (Immunities and Privileges) (Scotland) Amendment Order 2015 [Draft]
Good morning and welcome to the 32nd meeting in 2015 of the Justice Committee. I ask everyone to switch off mobile phones and other electronic devices. No apologies have been received.
The first agenda item is consideration of an instrument that is subject to affirmative procedure—the draft International Obligations (Immunities and Privileges) (Scotland) Amendment Order 2015.
We last took evidence from the Cabinet Secretary for Justice on the instrument on 27 October. The motion to approve the instrument was not moved at that meeting in order to allow time for the Government to provide more information on the instrument. Parliament subsequently agreed to suspend the standing orders rule on deadlines for scrutiny of affirmative instruments to allow the committee to complete its consideration of the instrument.
I welcome to the meeting Michael Matheson, the Cabinet Secretary for Justice, and Scottish Government officials Nicola Wisdahl from the civil law and legal system division, and Alastair Smith from the directorate for legal services. I remind everyone present that officials can take part in this agenda item but not in the formal debate on the motion that follows.
I thank the cabinet secretary for the further information that he provided in advance of the meeting. Members should also have received a submission on the instrument from an external organisation, which the clerks forwarded on Friday. Cabinet secretary—I invite you to make an opening statement.
Good morning. Although the draft order is quite short, I appreciate that members have a number of queries about its purpose. As the committee and Parliament have not seen a similar order for some time, it might be helpful if I begin with a few words about the purpose and effect of the order and the international organisation that it concerns.
The order would confer various legal immunities and privileges on, or in connection with, a new international organisation—the Asian Infrastructure Investment Bank, which is a multilateral development bank. Multilateral development banks are institutions that are established by international agreements. Their goal is to provide finance and advice for the purposes of development. They finance projects by providing loans and grants to borrower countries, using funds from—or raised in—donor countries. The World Bank is a well-known example.
The purpose of the AIIB is to address the gap in investment in infrastructure in Asia. The United Kingdom Government signed up to be a prospective founding member. Prospective members have concluded an international agreement setting out the structure and functions of the organisation. The agreement also sets out the organisation’s status in international law. To enable the independent exercise of the AIIB’s functions as an international organisation, certain privileges and immunities are to be afforded to it. Those privileges and immunities will apply in all the states that become members of the organisation. As the organisation is international, no individual country should derive undue fiscal advantage from it.
The conferral of those immunities and privileges is, in effect, a condition of membership of the organisation. However, the AIIB and its officials would be expected to comply with UK law and Scots law. Some privileges and immunities relate to reserved matters and have been conferred by legislation at Westminster.
Since the committee last considered the order, its United Kingdom equivalent has been approved by both Houses of Parliament, without opposition, and the Privy Council approved the order on 11 November. However, some of the privileges and immunities relate to devolved matters. That is why this order is before the committee and subject to affirmative resolution of the Scottish Parliament.
The purpose of the order is to add the AIIB to the list of organisations that have been granted similar privileges and immunities in Scotland. Some multilateral institutions have privileges and immunities that predate devolution—they include the European Bank for Reconstruction and Development and the Inter-American Development Bank. Other organisations have been afforded privileges and immunities since devolution—these include the International Maritime Organization and the European Police College.
The draft order will add the Asian Infrastructure Investment Bank to the post-devolution list—the list in the schedule to the International Organisations (Immunities and Privileges) (Scotland) Order 2009. The nature and scope of the immunities and privileges for the Asian Infrastructure Investment Bank are set out in the schedule to the draft order. They reflect those in the equivalent Westminster order and the terms of the founding agreement.
The purpose of the draft order is to help the UK to fulfil, with respect to Scotland, the international obligations that will become effective on the coming into force of the agreement establishing the Asian Infrastructure Investment Bank. Those international obligations were entered into by the UK Government with the intention that they will take effect throughout the UK.
In entering into those obligations, there is considerable opportunity for people who work in the financial and professional services sectors in Scotland. Those sectors employ almost 100,000 people directly and about the same number indirectly. Scottish companies already have a strong background in those fields. Committee members will be aware of the success of the UK Green Investment Bank, which is based in Edinburgh. The draft order is necessary if Scottish businesses are to be able to take advantage of the potential work that membership of the Asian Infrastructure Investment Bank might generate.
I hope that that is helpful. I am more than happy to take questions from committee members.
Good morning, cabinet secretary. Thank you very much for your clarification—in particular, the list of organisations that you gave us. That is very helpful for us to understand exactly what we are agreeing to. I welcome the order and I will be happy to support it.
Good morning, cabinet secretary. Thank you for the additional information. I am not convinced that it takes us much further forward, so I will follow up on some of the points that you raised. In your letter, you say:
“It is countries, as shareholders, who will be involved—not ordinary individuals.”
However, the policy note’s introduction talks about legal privileges and immunities being conferred on
“persons associated with the Bank,”
so clearly the draft order relates to individuals. Do you accept that?
The bank is owned by 57 member states that are either regional or non-regional members. However, the immunities and privileges are for those who are employed by the bank and involved in its functions.
So, the immunities and privileges are conferred on individuals.
Yes they are—for purposes that are related to the functions of the bank.
I am an internationalist: I want international co-operation. I want Scotland to be a good global citizen and to help the rest of the world. I also want us to clamp down on money laundering, fraud and all the worst practices of the banking industry.
The policy note talks about the draft order being required for the bank to “operate effectively”. How would the bank’s effectiveness be affected in Scotland were we not to say, “You are immune to criminal prosecution” or to confer all the other privileges that are listed?
I suspect that that would put a challenge to the UK Government, which is a founding member of the AIIB, because it would not be able to meet all the obligations that are set out in the international agreement for the bank’s establishment. I imagine that the AIIB would be reluctant to engage with the financial and professional services sector in Scotland because it would not have here the privileges and immunities that it would have in other countries. How that would play out in the bank’s behaviour is a matter for the bank, but I imagine that it would be reluctant to engage with Scottish institutions that may wish to offer it financial and professional services, because it would not have the protections that it would have in other countries.
There is a difference between protections and immunities. We are all protected by the law, but we are not immune from prosecution if we err in law. Is it not the case that the public would expect the Cabinet Secretary for Justice in Scotland to exhort people to adhere to the law, rather than their being granted immunity from adherence to the law in Scotland?
Keep in mind that the immunities are for functions relating to the bank—
I am not bothered what they are for. The law is the law.
It is worth keeping it in mind that, even where immunities and privileges are provided, under normal diplomatic conditions, individuals are expected to adhere to the laws of the given country and host countries can ask individuals to give up those immunities and privileges for the purposes of pursuing legal matters with them. It is part of the international agreement that the UK Government has entered into—a condition of which is that all 57 member countries provide the immunities and privileges.
Are you able to tell me what “immunity from” judgment means? That is one of the effects of the order.
I presume that that would relate to judgments on matters in a court.
What does
“The Bank’s premises are inviolable”
mean in practical terms?
It means that you cannot interfere with its premises.
The covering paper tells us:
“No equality impact assessment has been completed as there is no effect on people other than those to whom the UK Government has afforded privileges and immunities.”
However, it is the Scottish Government that is asking us to afford those privileges and immunities.
In so far as?
The UK Government may well ask, but we still have a situation in which the Cabinet Secretary for Justice in Scotland is coming to request that this committee agree.
Yes.
Okay. What is your view on the response to the committee’s question about the effect of the instrument not being passed, which is the single sentence:
“This is a matter for the UK Government”?
Is that respectful of Scots law and, indeed, the committee?
Are you asking what the UK Government would do if the Parliament withheld its consent?
Your final sentence, when asked what the UK Government would do—
The final sentence in what?
In the annexe to your letter dated 12 November, you state:
“Members of the Committee asked what the UK Government will do if the Order is not passed in Scotland.”
The official reply is:
“This is a matter for the UK Government.”
I find that dismissive.
No, it is a matter of fact. That would be a matter for the UK Government, because it has entered into an international agreement.
Cabinet secretary, do you understand any of the concerns about a presentation that asks for political immunity and exemption from the normal rule of law? Would it not raise suspicions with you as an individual if someone said, “I’ll transact business for you if you guarantee my immunity”? Would that not immediately raise suspicions? If the answer is that we have aye done it that way, it is time for change.
Well, that may be your view—
It is my view.
That may be your view, but you asked me specifically about the final sentence in the annexe, and it is a fact that it would be a matter for the UK Government. It has entered into an international agreement.
Thank you.
We have received a supplementary letter—I do not know whether you have seen it, cabinet secretary—that indicates that developing countries in Asia will require some $8 trillion for infrastructure over the next 10 years. Thank you for the additional information. I have no desire to do anything to prevent those countries from getting the investment that they require, but I am still uncertain about some aspects. For example, why should the bank have relief from non-domestic rates for its premises? If it is handling billions of dollars of investment, surely it can pay its non-domestic rates. It seems peculiar to give it that type of immunity. The order also states:
“No devolved and local taxes shall be levied on or in respect of emoluments paid by the Bank to a person connected with the Bank.”
Again, that looks like some degree of tax avoidance by somebody who works with the bank. I see the purpose of the bank in terms of its investment and the opportunities for developing countries to get that investment, but in terms of having a level playing field, I am not sure why the bank should not pay its rates.
That is part of the international agreement—the privileges or immunities must be provided to the bank by all the countries who want to join the bank or be members of the bank. Protection must be given from local taxation, local rates for buildings that it might occupy and so on.
10:00The other factor, which Elaine Murray mentioned, is our giving the bank a level playing field with other international development banks that have been afforded similar rights. That will allow it to undertake its work in a similar way. That flows from the international agreement that the UK Government entered into, which is why we have been asked to sign up to the provisions that have been set out in the international agreement.
It seems a little odd for institutions that handle enormous amounts of money to be exempt from the taxation that other businesses are subject to. I am not saying that the Scottish Government arranged that; I appreciate that it is in some sort of international agreement. However, does it not reveal something dubious; that many large and wealthy organisations are enticed to have a presence here by the offer of an arrangement whereby they do not pay taxes?
Hold on. It is worth keeping it in mind that the bank is a non-profit-making organisation. It is owned by the countries that are members of it, which raise capital in their own territory for the purposes of investment in Asia. It is not like a large corporate bank—a profit-making institution—being afforded protection from paying local taxes on its property and so on.
Your wider point around international agreements and whether organisations of this type should be given such immunities and protections is part of a wider debate that would have to take place on an international basis, because international treaties have been drafted in such a way as to provide such immunities and protections. That would have to be taken forward by the UK Government. I am not aware of any intention on its part to do so, and I am not aware of any appetite for such a debate on the part of other nations.
As I said, we are talking about a non-profit-making organisation. The money that it makes goes back into the investment processes for which it has been set up by the member states that own it.
That is a helpful clarification. Is there any likelihood that the bank will be based in Scotland?
Its principal base will be in Asia. That is why the UK Government was keen to be a founding member. It has done that with a view to the professional and financial sector in Scotland in particular participating in it and offering services to it, with an overall beneficial impact on the UK. The bank might not have a physical presence here, but we have the opportunity to engage with it and to offer services to it, especially because Scotland has a large financial sector that has experience of multilateral investment processes. That would involve not only organisations that are directly involved in investments, but pension funds and insurance companies that are based here that might wish to work in partnership with the bank in relation to some of the infrastructure projects that are to be funded in Asia.
So, might some of the provisions in the order not have any effect, in reality.
There might not be a building in Scotland, but the order will allow the organisation to operate with financial and professional institutions in Scotland.
Margaret McDougall has a question.
Elaine Murray has asked my question.
I want to make a couple of quick points. Whatever the benefits of the bank, is it the case that our failure to pass the instrument would be nothing but damaging to the Scottish economy?
It is clear from the letter that the committee has received from Scottish Financial Enterprise that it believes that that could be the case. Such failure could result in the bank being reluctant to engage with the Scottish financial services sector, which might otherwise be able to offer expertise to the bank and the infrastructure developments that it will invest in. Failure to pass the instrument could have a negative impact on the Scottish economy.
Am I right in assuming that France and Germany feature as shareholders, among the 57 countries that are participating in the organisation?
There are two classifications of members: regional members and non-regional members. France, Germany, Iceland, the Netherlands, Norway, Sweden, Spain, Switzerland and the UK are non-regional members. Regional members go from Australia to Vietnam, alphabetically.
When the instrument came before us, I noted that it concerned something that I had not seen before. I welcomed the opportunity to have a pause in consideration in order for us to gather some more information. It would have been wrong if, through some sort of misunderstanding, Parliament had prevented the UK from fulfilling its obligations as a founding member.
I would not like anyone to suggest that we are suggesting that the AIIB is somehow not of the same standing as other international organisations—the Caribbean Development Bank, the Asian Development Bank and the Inter-American Development Bank—such as the cabinet secretary has mentioned. I am reassured by what I have found out about the process and I want to offer the organisation a chance to operate on a level playing field with the other ones.
Does Margaret Mitchell want to ask a question?
No, I am satisfied.
That takes us to item 2 on the agenda, which is the formal debate on the motion to approve the instrument. I invite the cabinet secretary to move motion S4M-14396.
Motion moved,
That the Justice Committee recommends that the International Organisations (Immunities and Privileges) (Scotland) Amendment Order 2015 [draft] be approved.—[Michael Matheson.]
I take it that no member wishes to speak in a debate on the motion, as we pretty much had the debate under item 1.
The question is, that motion S4M-14396, be agreed to. Are we agreed?
Members: No.
For
Allard, Christian (North East Scotland) (SNP)
Campbell, Roderick (North East Fife) (SNP)
Grahame, Christine (Midlothian South, Tweeddale and Lauderdale) (SNP)
McDougall, Margaret (Central Scotland) (Lab)
McInnes, Alison (North East Scotland) (LD)
Mitchell, Margaret (Central Scotland) (Con)
Murray, Elaine (Dumfriesshire) (Lab)
Paterson, Gil (Clydebank and Milngavie) (SNP)
Against
Finnie, John (Highlands and Islands) (Ind)
The result of the division is: For 8, Against 1.
Motion agreed to.
As members are aware, we are required to report on all affirmative instruments. Are members content to delegate authority to me to sign off the report?
Members indicated agreement.
10:07 Meeting suspended.