Cayman Islands: The Confidential Information Disclosure Law: Increasing corporate transparency
From Mourant Ozannes
AUGUST 2016
This briefing is only intended to give a summary and general overview of the subject matter. It is not intended to be comprehensive and does not constitute, and should not be taken to be, legal advice. If you would like legal advice or further information on any issue raised by this briefing, please contact one of your usual Mourant Ozannes contacts.
The Cayman Islands’ Confidential Relationships (Preservation) Law (the CRPL) – often unfairly dubbed a ‘banking secrecy’ law – was repealed on 22 July 2016 and replaced by a new statutory confidentiality regime in the form of the Confidential Information Disclosure Law, 2016 (the CID Law). The new framework has been implemented as part of the Cayman Islands’ commitment to being at the forefront of international standards on tax transparency as well as cooperation between taxation and law enforcement authorities globally.
Originally enacted 40 years ago, the CRPL made it a criminal offence for a person to disclose without consent any confidential information obtained during the course of business, subject to certain limited exceptions. The CID Law removes the criminal sanction for breach of confidence, and establishes several clear gateways – or safe harbours – through or within which confidential information may be disclosed without prior consent of the person to whom the information relates.
The introduction of the CID Law follows on from a number of other measures already taken by the Cayman Islands Government to further comply with and promote its reputation for transparency and cooperation. This step consolidates bridges which the jurisdiction has built with organisations such as the Organisation for Economic Cooperation and Development (OECD), the International Monetary Fund (IMF) and other national tax and law enforcement authorities, through measures which include:
• tax information sharing arrangements with almost 90 countries, including intergovernmental agreements for the sharing of information with tax authorities in the USA and the UK;
• a commitment to introduce a new Data Protection Law which would establish a data protection regime which is on a par with legislation already in place in the European Union, and which is expected to acknowledge privacy as a basic human right; and
• a framework for centralised access to information about the beneficial owners of Cayman Islands companies, and an information sharing regime by which overseas tax and law enforcement authorities may on request be provided with those details.
Enabling Disclosure
Having removed the criminal offence created by the CRPL, the CID Law creates certainty that, when a duty of confidentiality arises during the course of business, the disclosure of information in the circumstances set out
below shall not constitute a breach of the duty of confidence and shall not be actionable at the suit of any person:
• pursuant to requests by local tax, law enforcement and financial regulatory authorities (including the police, the Grand Court, the Cayman Islands Monetary Authority (CIMA), the Financial Reporting Authority, the Director of
Public Prosecutions and the Cayman
Islands Anti-Corruption Commission);
• in compliance with an order or request of a Cayman Islands authority pursuant to its international obligations, such as the Mutual Legal Assistance Treaty with the USA or the Criminal Justice (International Cooperation) Law;
• in the normal course of business or with the consent, express or implied, of a principal; and
• in accordance with, or pursuant to, a right or duty created by any other law or regulation of the Cayman Islands.
The CID Law affirms that the Cayman Islands Government is cognisant of, and supports, the need for local and international services providers to fulfil all relevant reporting obligations pursuant to international law.
Protecting the Public Interest
By introducing a ‘whistle blowing’ provision that aims to protect a person disclosing confidential information on wrongdoing, or in relation to a serious threat to life, health, safety of a person or in relation to a serious threat to the environment, the Cayman Islands has become one of a growing number of jurisdictions that specifically legislates to protect those who act in the public interest.
A person making such a disclosure now has a defence to an action for breach of confidence provided that the individual acted in good faith and in the reasonable belief that the information was substantially true and discloses evidence of wrongdoing, of a serious threat to life, health, safety of a
person or in relation to a serious threat to the environment.
Continuing Obligations to seek direction from the Grand Court
The CID Law retains one of the requirements of the CRPL that, unless the prior express consent of the principal has been obtained
to giving evidence of a confidential nature, directions be sought from the Grand Court prior to disclosing confidential information during proceedings. The court’s power to direct that such evidence is given, withheld or given subject to specified conditions remains unaltered by the CID Law.
Penalties
The CID Law does not contain any specific penalties for contravening its provisions, meaning that the court will apply common law and rules of equity in the event of a breach.
Conclusion
We welcome the decriminalisation of unlawful acts of disclosure.
The provisions of the CID Law are framed to demonstrate that the Cayman Islands does not support so-called ‘secrecy’ legislation, but rather maintains appropriate respect
for the privacy of individuals and corporate entities whilst providing avenues for the safe transmission of information in the interests of transparency and justice.
The CID Law proves, yet again, that the Cayman Islands is committed to working closely with the OECD, the IMF and other international tax and law enforcement authorities and governments to improve corporate and tax transparency and to dispel the myth that the jurisdiction provides a veil of secrecy behind which unlawful activity may be conducted.
Contacts:
Simon Dickson, Partner, Cayman Islands
+1 345 814 9110 [email protected]
Danielle Roman, Partner, Hong Kong
+852 3995 5705 [email protected]
Shaun Folpp, Partner, Hong Kong
+852 3995 5729 [email protected]
Robert Duggan, Managing Partner, London
+44 20 7796 7622 [email protected]
Delia McMahon, Senior Associate, Cayman Islands
+1 345 814 9130 [email protected]
Hannah Crews, Senior Associate, London
+44 20 7796 7618 [email protected]
