The real Price of Britain's Network of Fiscal Paradises
The Gulf Investment Corporation (GIC), a supranational lender owned by the six Gulf countries, recently filed a discovery request within the Southern District of recent York. Based on the fund, run jointly by Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the UAE, some “hundreds of millions of dollars” has gone missing from the Cayman Islands-based financial vehicle referred to as Port Fund.
In a separate November 2021 filing within the Caymans Grand Court, the GIC expressed concerns over the conduct of KGL Investment Company (KGLI), the sponsor and placement agent of the Port Fund. Citing the alleged misappropriation of assets, the November application was made to acquire full information from the Port Fund about the vehicle's state of economic and overall financial condition.
The Port Fund's Missing Proceeds
According to the recent US discovery application, the Port Fund failed to report a discrepancy of near to half a billion dollars from an investment within an airport infrastructure project in the Philippines-a discrepancy which was ultimately wired to an account in Dubai, as opposed to the Port Fund's regular accounts. To make matters worse, according to the GIC the amount was just partially disbursed to Port Fund investors, with no justification for the retained funds.
“Specifically, The main harbour Fund belatedly reported that the arises from its sale of the Clark Asset amounted to US$496 million (after its principals initially claimed it was far less than even that quantity),” the united states application reads, “the half-billion-dollar discrepancy has never been acknowledged, not to mention explained, by the Port Fund.”
What, exactly, were these missing monies used for? According to the Kuwaiti government-which would be a major investor within the Port Fund-they might have in part served to attack Kuwait itself. Included in its mammoth lobbying effort to pay off former executives Marsha Lazareva and Saeed Dashti, faced with misuse of public funds and money laundering, everyone from Cherie Blair to Neil Bush, the son of U.S. President George H.W. Bush, have attempted to cast doubt around the Kuwaiti justice system.
The latest GIC filing will likely ratchet in the scrutiny on Lazareva, Dashti as well as their beleaguered company-but additionally, it raises broader questions about the wide-reaching effects of opaque financial regulation in overseas British territories such as the Caymans. For years, successive British governments have, at best, turned a blind eye to- and often even actively encouraged-the development of overseas tax havens in overseas territories.
The British Empire of Tax Havens
According to the Tax Justice Network, the 3 most “corrosive” corporate tax havens in the world currently fly the Union Jack: Bermuda, the British Virgin Islands, and the long-infamous Cayman Islands. “The only way the UK sticks out internationally on tax is on leading a race towards the bottom,” claimed shadow chancellor from the Tax Justice Network, John McDonnell, last May, “[Britain is] creating tax loopholes and dismantling tax systems of countries within the global south.”
It seems unlikely that London will change its tune in the near future. Probably the most powerful advocates of Britain's insular Brexit scheme, from Arron Banks to Jacob Rees-Mogg, have been found squirreling their very own cash away in Britain's offshore enclaves. If your so-called “hard Brexit” is allowed to proceed, the united kingdom may pivot its very own economic model and be a tax haven across the Channel.
Stymying the UK's trade ambitions
This wouldn't simply be a serious threat to Britain's welfare state, but also to London's post-Brexit ability to negotiate independent handles countries and economic blocs outside the European Union (EU), like the Gulf Cooperation Council (GCC). The Gulf has already been a major market for British exports, and UK lawmakers want to the center East to bridge the market gap which may be left within the wake of the country's departure from the European economic bloc.
“When we look at the GCC – we have started building our relationship more dramatically within the last couple of years,” the united kingdom Minister of State for Trade and Export Promotion, Baroness Rona Fairhead CBE, told Dubai reporters this past year. “In the future, can there be possibility of a free trade agreement between the GCC and also the UK: absolutely.”
GIC's latest filing in the Caymans raises questions regarding whether Fairhead's optimism is justified. How receptive will the GCC be to London's trade overtures while it is being forced to go to court to recoup vast sums of dollars- funds which went missing thanks, a minimum of in part, towards the Cayman Islands' lack of fiscal transparency?
Now on the cusp of the imminent Brexit, London's attempts to follow-through on its promises of a spate of recent trade handles partners away from EU- such as the rising economic powerhouse from the GCC-may be thwarted by its tolerance for dodgy financial dealings in its own territories.
