Partial Success For Cayman Islands At ECJ

by Amanda Banks, Tax-News.com, London

02 April 2003

Although the ECJ's Court of First Instance dismissed the Cayman Islands' application for the formation of a Commission Working Party on the issue of the Savings Tax Directive (which will apply information-sharing rules or a withholding tax on investment returns to EU Member States), the ECJ said that the EU cannot impose an obligation on the territory to implement the proposed Directive on the Taxation of Savings Income.

The European Parliament had proposed an amendment which would have included Member States' dependent territories in the scope of the Directive, but this was not adopted by the Commission.

The result was announced at a press conference by Leader of Government Business the Hon. McKeeva Bush late last week. In addition, the court ruled that the UK was not legally required as a full member of the EU to impose the directive on the Cayman Islands. The Court also confirmed that the directive is a fiscal measure, which has favourable connotations for the Cayman Islands from a constitutional perspective.

The ECJ said that the question of whether the UK could constitutionally impose the Directive on the Cayman Islands via an Order In Council was something that depended on the exact arrangements between the UK and the Islands, and was outside the ECJ's remit.

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