Overseas Chambers of Peter Harris

Maison de la Boucterie
Rue de la Boucterie
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Jersey, JE2 7ZW

Never mind the Registre de trusts, here comes the French Conseil Constitutionnel ....

October 22nd 2016

It had to happen. My disgust at French political intrigue has lead to a possibly unacceptable dosage of spirit, but kindly excuse the end, which justifes the means.

So, what has happened? The French Trust Register has been declared unconstitutional, but has now been ressurrected with a reduced level of access. Only certain administrations can now consult it. It s no longer open to journalists and members of the French the tax paying public.

The attempts by several organisations, whether State of other forms of sponsorship attempting to render Fiscal policy objectives criminally enforceable has met with its limitation, a legal abyss. On cannot conflate sectarian economic viewpoints by nature "soft" if not woolly, with law and property rights, particularly when the legislation concerned is linguistically unable to apprehend the full legal effects of the targeted set of foreign property rights. Treating trusts as a contractual mandate, as is the French administrative tendency, has propagated a freedom for manoeuvre outside the strict legal definition, notably at the O.E.C.D. level by M Saint-Amans, and internally by Sénateur Pierre Marini. That is doomed to conceptual failure for imprecision and deeming something to be something which it is not. The Common Reporting Standard treating everyone concerned administratively as being an "account holder" irrespective of actual entitlement being one example of the exponential idiocy stemming from assuming that one or more isolated case is sufficient to define the remainder. That is an example of fiscal policy crashing when attempting to land on the legal terrain of the reality of correct constitutional assessment, declaration and payment of taxes. The laws of taxation and collection of revenue do not equate with the implementation of fiscal policy, except of course in France.

Tax Research LLP, being but one of the visible, dare I say re"visionary" tips of the underlying iceberg of politically inspired ignorance which will sink their titanic cross-border canoe.

It is clear now the the near hysterical attempts being made at the European level to kill off the trust have a further Beechers Brook to leap here. Having lost traction during the Brexit process, one can hardly hope for further assistance or understanding in that upcoming disinstitutionalisation.

The full text of Décision n° 2016-591 QPC du 21 octobre 2016 is set out at this link, in French obviously, and therefore the underlying principles of the invalidation may not be familiar to those outside the French culture to which the decision is addressed. Being slightly livid at the lack of responsible legal scholarship involved in the French miss-assimilation of the trust concept, the following is liberally showered with a degree of quasi-socratic irony that I hope the reader will enjoy, with a proposal for a cocktail of hemlock at the end.

It is clear that the French administration and executive going to Parliament have overstretched their constitutional capacities, and were, what is more, aware that they were so doing in order to stymie the legal qualities of the property arrangements as not being sufficiently French to merit international recognition without reclassifying it as a form of contractual mandate equivalent to an investment account. For example, Patrick Saint-Amans, to whose superior I presented a proposal at Bercy in the 1990s for using a combined trust and SCI to hold the succession to Bordeaux Vineyards evidently did not understand anything in it but a threat to his training and understanding. Perhaps I did not emphasise the fact that this was a valid method of holding agricultural property in England enough, but then the British have always had a closer relationship with Bordeaux than the Parisian cares to appreciate.

It will not however be lost on those members of the European Parliament who judge it as a means of an elite to elude their notions of "ethical" taxation, but neglect the fact that it is a legitimate means of property ownership and management that will only be seen as sinning in the eyes of the blinkered beholder.

What did the Decision actually say?

5. En favorisant, par les dispositions contestées, la transparence sur les trusts, le législateur a entendu éviter leur utilisation à des fins d'évasion fiscale et de blanchiment des capitaux. Il a ainsi poursuivi l'objectif de valeur constitutionnelle de lutte contre la fraude et l'évasion fiscales.

6. La mention, dans un registre accessible au public, des noms du constituant, des bénéficiaires et de l'administrateur d'un trust fournit des informations sur la manière dont une personne entend disposer de son patrimoine. Il en résulte une atteinte au droit au respect de la vie privée. Or, le législateur, qui n'a pas précisé la qualité ni les motifs justifiant la consultation du registre, n'a pas limité le cercle des personnes ayant accès aux données de ce registre, placé sous la responsabilité de l'administration fiscale. Dès lors, les dispositions contestées portent au droit au respect de la vie privée une atteinte manifestement disproportionnée au regard de l'objectif poursuivi. Par conséquent, sans qu'il soit besoin d'examiner les autres griefs, le deuxième alinéa de l'article 1649 AB du code général des impôts doit être déclaré contraire à la Constitution.

The Conseil admitted that the objective of the struggle against, not the elimination of, tax evasion and fraud was a constitutional "value".

The fact that the names of the Constituant (read Settlor), the beneficiaries (read contractual) and the administrators of a trust (misread anyway, note that the term trustees is not a contractual one), grants the person consulting the Register information on the manner in which the individual intends his property to be disposed of. That is a reference inter alia to the French right to keep one's testamentary, or here assimilated dispositions private.

The insidious thing is that the French administration knew that it was acting unconstitutionally when it introduced the legislation to Parliament, as did the Parliament itself. That is the problem with drinking dirty stirred martinis before voting. Shaken Martinis imply a degree of icy self questioning before the political stirring,intoxication, then carousing.

The French have contented themselves with stirring it to date.

The Conseil stated that Parliament had not set out the motivation for allowing public consultation, it obviously did not dare to, nor limit the circle of person able to consult the Register, composed as it was of tax information confided to the Tax administration by declaration. The Register therefore had violated the constitutional right to a vie privée of the subject in a manner manifestly disproportionate to the objective pursued.

The Hunting of the Snark?

It is clear that that principle, at that point, becomes a a relative concept rather than the absolute right of confidentiality granted at Common Law: Dave Hartnett's case (Oops!), or better R (on the application of Ingenious Media Holdings plc and another) (Appellants) v Commissioners for Her Majesty's Revenue and Customs (Respondent) is one case where such an abuse was well and truly "whacked" by the Supreme Court on 19th October, 2016. Putting the same on a register does not absolve the administration from compliance with elementary constitutional principles, that same constitution which grants it the privilège or charge to extract taxes from the Body Politic, if I may be forgiven that heady cocktail of wildly different but in effect parallel constitutional terms from both sides of the Manche -. reminiscent of a dirty Vodka Martini. Back to the makers and shakers, not to the quakers at Tax Research LLP.

The French judgment was founded on the basic principle of proportionality, unfortunately not a fundamental Breach of what we would describe in England as an absolute common law right to confidentiality, and the application of that principle to the éléments declared in a ta declaration.

The problem here is that the French delegation of powers between the various state organs is a social contract phenomenon. Each citizen's rights in relation to the whole may be strong, but they are merely relative in relation to the remaining social fabric of the contractual republican separation of power. I personally am grateful to be living and working within a system of entrenched and vibrant common law principles under a constitutional ejectable monarchy cum democracy. At least I do not need to mount a barricade and call upon fellow "idealists" to defend my rights. They are there, no matter how power flushed individual civil servants such as Mr Hartnett become. Power corrupts by its over exercise in the pursuit of ideals ....

The Conseil therefore based its finding upon the now trite theory of "proprortionality" in relation to the guarantee of "la vie privée", the area of the subject's existence outside arbitrary State regulation and influence. It is very much wider that the term private life. That inherently includes the right to dispose of one's property freely, and without necessarily everyone else being able to scrutenise the manner in which it is to be done. Tax Research et al. kindly note! Whilst it is clear that one of the unsaid aims of the Conseil was to preserve the confidentiality of testamentary dispositions, the article 792 bis CGI dispositive does treat trust disposals on death as that, albeit wrongly. That is where the ugly head of the iceberg of the misconstruction of legal concepts on a "pseudo-ethical" basis of ignorance raises its hydra like head.

It is worth noting that both Laurent Fabius and Lionel Jospin sat on the Conseil that determined the issue. It was therefore incontrovertibly an objective decision.

However, the French Government has made so much of its attempts to moralise - monetise?- everyone else's laws of property and incidentally markets that it might attempt now to restrict access to a limited circle or invent a new reason for breaching quasi-testamentary confidentiality, rather than losing its financial and political international investment. Its agents abroad such as those within the OECD and the IMF, not yet the UN may still yet be able to stir dirty cocktails of misundstanding and serve these to their audience at these institutions.

Since 22nd October, the offending article 1649AB CGI has been amended so as to grant access to the Register only to certain adminstrations alone; not to the general taxpaying public.

For the Bar at the European Parliament, not in honour of the departing Farage, may I propose the following stirred libation, noting the reversion to imperial:

  • 3 ounces gin -- London dry gin of course
  • 1 ounce vodka ( Ukrainian by way of solidarity: Russia being geographically in Europe)
  • 1/2 ounce blonde Lillet (probably best to put that Bordeaux concoction in rather than the real Kina Lillet, one can't avoid a slight concession to French intellectual hypocrisy in a European context)

- please don't stir it, it would improve the taste from the slight bitter touch, "Mais" to quote Ian Fleming " n'enculons pas des mouches";  at last not all of them at the same time .......