The EU and the Channel Islands
The formal relationship between the Channel Islands and the EU is enshrined in Protocol 3 of the UK’s 1972 Accession Treaty, and confirmed in what is now Article 355 (5) (c) of the EU Treaties. Under Protocol 3, the Islands are part of the Customs Union and are essentially within the Single Market for the purposes of trade in goods, but are third countries (ie outside the EU) in all other respects. However the Channel Islands have a close relationship with the EU in many different fields, not simply those covered by the formal relationship under Protocol 3, as this note explains. Both Jersey and Guernsey voluntarily implement appropriate EU legislation or apply the international standards on which they are based.
Trade and Investment
As small islands, Guernsey and Jersey have a services based economy. Virtually all manufactured goods are imported. The main exports of goods are agricultural and fisheries products. Exports of goods from the Channel Islands to the EU and from the EU to the Channel Islands are treated as intra-EU trade. Through being a part of the customs union, the Channel Islands apply the Common External Tariff (CET) to imports of goods from third countries. The Channel Islands are not within the EU common system of VAT so trade in goods is not subject to the EU Principal VAT Directive. For those areas covered by Protocol 3, EU legislation is directly applicable and the Channel Islands are regarded as part of the UK Member State.Agriculture and Fisheries
Many of these products are exported to the EU. The detailed rules setting out the conditions with respect to trade in agricultural products (which include fish and fish products) are set out in EC Regulation 706/73, as amended. Under this Regulation the Channel Islands must adhere to EU rules to facilitate and enable trade in such products including in relation to veterinary legislation; animal health; plant health; marketing of seeds; food; feeding stuffs; and quality and marketing standards. The implementation of legislation is underpinned by active cooperation between veterinary, agricultural and food safety experts in the Channel Islands and their EU counterparts. For example under the auspices of the European and Mediterranean Plant protection Organization (EPPO) France, the UK, Guernsey and Jersey are collaborating in the Colorado Beetle Campaign (CBC), an early warning system designed to protect the vital potato export industry.
The Channel Islands are outside the Common Agricultural Policy (CAP): they do not pay into nor receive funds from the EU budget. Similarly EU fisheries conservation measures under the Common Fisheries Policy (CFP) do not apply directly to the Channel Islands under Protocol 3 and the Channel Islands do not pay into or receive money from the EU (or UK) budget, including the European Maritime and Fisheries Fund – EMFF. However Regulation 706/73 imposes certain constraints on the Channel Islands’ own systems of agricultural support: state aid for exports of certain agricultural products to Member States and to non-EU countries may not exceed the relevant aid, refund or compensatory amount permitted to be granted by the UK under the respective EU rules. Although outside the CAP, the Channel Islands are indirectly influenced by it and the rural development programme in each Bailiwick is consistent with the direction of travel of CAP reform. For example agricultural support in both Guernsey and Jersey has been ‘decoupled’ from production for several years.
Transport, energy and the environment
Protection of the environment on land and in the surrounding marine areas is crucial for the unique ecosystems of the Channel Islands. Environmental legislation is not covered by Protocol 3 but in some cases EU environmental standards, in areas like air and water quality, are used as guidelines for domestic legislation in the Channel Islands, even though there is no legal obligation to do so. The Channel Islands are committed to some international environmental standards on which EU legislation has subsequently been based. For example, the Channel Islands are covered by the UK’s ratification of the Basel Convention on the control of trans-boundary movements of hazardous waste and their disposal, although for the purposes of the EU’s implementing legislation in this area they are third countries. There is close bilateral cooperation with the UK and France on maritime protection.Transport
Guernsey and Jersey are attractive tourist destinations with their natural beauty and their unique culture and heritage. Tourism is therefore an important industry. The Channel Islands are part of the Common Travel Area (CTA) with the UK and Ireland. This provides for passport-free travel and simplified entry procedures. It does not derive from EU law but predates it and hence is not linked to Protocol 3. Like the UK and Ireland, Guernsey and Jersey are outside the visa/check-free Schengen area and so operate border controls for flights or ships arrivals from countries other than the UK or Ireland. EU nationals are not subject to any visa controls.
[/expand] Immigration and emigration
Protocol 3 excludes “Channel Islanders” from the provisions of the Treaty relating to the free movement of persons provisions of the Treaty. However for Protocol 3 purposes, a person who was born (or who has at least one parent or grandparent who was born) in the UK, or who has resided in the UK for 5 years is not a “Channel Islander”. Such people do enjoy free movement throughout the EU (including the right to work and reside).
Financial services firms are major employers in the islands, with over a quarter of the workforce (19,000 jobs) employed in the sector. As major well-regulated financial centres, both Guernsey and Jersey are significant net providers of liquidity and investment funds to the EU economy.
Protocol 3 does not cover services, so the Channel Islands are treated as third countries for the purposes of EU financial services legislation. The Channel Islands have a robust and internationally respected system of financial regulation. Their own independent regulators enjoy excellent regulatory cooperation with their EU counterparts, including with the new European Supervisory Authorities.
Guernsey and Jersey have the same need as EU Member States to protect their public finances and therefore have common cause with the EU in tackling tax evasion, fraud and aggressive tax avoidance. The Channel Islands have shown themselves by their actions to be reliable, active and cooperative partners of the EU and of the wider international community. This idea of partnership was shared by Pierre Moscovici, the EU Commissioner for Economic and Financial Affairs, Taxation and Customs. After meeting with the Chief Ministers of Guernsey and Jersey on 13 January 2016, the Commissioner commented publicly:
“I very much welcome the continued active engagement of Guernsey and Jersey in the key international initiatives for fighting tax evasion, fraud and abusive tax avoidance, in which they are important partners of the EU. Their implementation of the Common Reporting Standard on automatic exchange of information from the 1st January, and their support of the BEPS programme, alongside the EU Member States, are particularly noteworthy and reinforce their standing as cooperative juridictions.”