The FT has noted this morning that:
Britain's listed water and energy companies should explore shifting businesses offshore to protect investors if a future Labour government sought to nationalise them, according to analysts at Macquarie, the Australian investment bank.
In a sign that utility investors are taking the threat of re-nationalisation seriously, Macquarie's equity research team argues that an overseas move could give companies such as Pennon and National Grid better safeguards against future expropriation than would be the case if they remained UK registered companies. “We see UK listed utilities either potentially re-domiciling, or restructuring foreign ownership to enjoy higher investor protection,” said Macquarie's utilities analysts in a research note.
The note says that the boards of UK registered utilities have a fiduciary responsibility to explore overseas registration urgently because a switch could “only happen before any potential dispute was reasonably foreseeable”. The note is titled “Four legs good, two legs better” – a reference to George Orwell's dystopian fable Animal Farm, which warned of the tendency for socialism to descend into tyranny.
I have always argued that offshore is a mechanism created by capital to launch an assault on democracy. That is exactly what is written all over this suggestion. Macquarrie are making it clear that people's choice to elect a government that might seek to take into public ownership the utilities that serve them should not matter: the 'fiduciary duties' of capitalism come first.
I would suggest Macquarrie are too late. First, saying it proves the public case against them. Second, the potential for this to happen is already foreseeable and so is not protected by treaties.
But the broader signalling is more important, and clear this morning. First we have Dyson demanding the UK behave like a tax haven. Now we have a warning that tax havens must be used to subvert the democratic choices of the UK population.
It feels as if class warfare has been declared.
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This is actually quite funny.
Considering this:
“The note says that the boards of UK registered utilities have a fiduciary responsibility to explore overseas registration urgently because a switch could “only happen before any potential dispute was reasonably foreseeable”
and this:
“I would suggest Macquarrie are too late. First, saying it proves the public case against them. Second, the potential for this to happen is already foreseeable and so is not protected by treaties.”
Your suggestion is of course correct and Macquarie’s ‘note’ as you say has, if anything, now confirmed that all this is foreseeable.
We should probably thank them.
Overall this sort of thing is further to the imperialist rort where so-called “free trade” treaties bestow privileges upon foreign firms and local firms move offshore to join them.
I often wonder how many people who post on here have had a working class upbringing or understand what it’s like to be brought up and live in a working class community. Let me assure you the vast majority of the working class are very aspirational and don’t really align themselves to much of the left wing rhetoric posted on here or to much of what a Corbyn Government would propose. A desire to work hard, have opportunity and “ climb the ladder” to a better life for their family epitomises the working class. There is an obvious dislike of the silver spoon brigade but I don’t see any desire to dramatically change society certainly as evidenced by the fact Corbyn isn’t in office when a Labour Government really should be. Class warfare is the dream of the left wing intelligentsia but it isnt shared by the vast majority foot soldiers on the ground – they are too busy just getting on with things..
Jim
I well recall my Granny’s tin bath when I was a kid
Not a flower bed or the like
Her bath was made of tin. And hung in the kitchen when not in use.
So yes I do know something of aspiration to break out. And yes, it does leave me very angry with those who want to stop others doing the same
That is the opportunity I want to create
It’s those who support the crass view that we can all be Dyson’s ‘if only’ that are holding opportunity back by not seeing that those with power are making very sure wealth and power is not shared
Oh Jim,
“Let me assure you the vast majority of the working class are very aspirational”
Bollocks! The very aspirational love to pretend that the working class are very “aspirational”.
The vast majority of the working class are not highly competitive, acquisitive, status-seeking or upwardly mobile and never have been.
“don’t really align themselves to much of the left wing rhetoric posted on here or to much of what a Corbyn Government would propose”.
Oh yeah? And you’ve asked them all personally have you or did you read that in The Sun?
“as evidenced by the fact Corbyn isn’t in office”
But somehow, in less than 2 years, won had the biggest increase in vote share since 1945 despite the MP’s “rebellion” and total mainstream media hostility That, no doubt, really annoys you.
“when a Labour Government really should be (in office)”
You don’t really want that so it may best if you don’t pretend that you do.
“they are too busy just getting on with things”
Which doesn’t suggest any thoughtful disagreement but condescendingly implies that they are too preoccupied to think.
As self-appointed (?) spokesman for an entire class you’d better-off speaking for yourself (honestly, if you can).
By the way – the 1980’s called and they want their tired old dogma back. Apparently you’ve hanging on to it for too long.
I have to confess that I have never done a single day’s manual labour in my life. I am not proud of that; it is just a fact. I do not speak for anyone else; I speak, and write, only to represent myself.
I have little interest in class, but not doubt there are some “aspirational” members of the “working class” (although I consider both concepts vague and ambiguous); and there will be others who, for a variety of possible reasons, are not aspirational. My inclination is to say, “so what”? Here is my problem. I recall that Oliver Letwin MP (Conservative, West Dorset) famously once observed (in a furore over fair access to good local schools), that he represented “the families with sharp elbows”. I have always found that people with sharp elbows are only too capable of looking after themselves. It is also noticable that their elbows are often just a little too sharp; and I am disinclined to spend much of my time time worrying about what more the ‘sharp elbows’ require to move even further ahead than the front of the queue. I think we should worry more about those who, for whatever reason, find that however reasonable and equitable their faint hope for themselves and families is, or the fair due they should expect, they are simply elbowed aside.
It really is as simple as that.
Well said and fully agreed.
I’m not at all sure that McQuarrie have thought this through properly. The unique feature of the utilities is that the vast majority of their assets are in the equipment which must be based in the UK. A government wishing to bring a utility into public ownership needs to purchase the assets, and to assume responsibility for the employees working to run those assets. It doesn’t need to purchase any central administrative facilities that are overseas, and nor should it expect to have any responsibility for any employees working in those overseas facilities. The net effect is that the government could easily pay very much less to nationalise such utility, leaving the headquarters with an unusable and probably pretty unsellable headquarters facility.
Craig,
You may have missed the point somewhat.
A lot of trade treaties offer privileged protection to foreign-based multinational firms through provisions such as the notorious “Investor-state dispute settlement” (ISDS) mechanism, while local firms remain subject to local law.
https://www.huffingtonpost.com.au/entry/isds-lawsuit-financing-tpp_us_57c48e40e4b09cd22d91f660
What Macquarie are basically suggesting is that British firms should make themselves foreign so that they can acquire the right sue the UK government under one of these treaties. With that leverage they may be able to extort the British people and ensure a big fat premium in return for any nationalised assets.
Maybe….
Well perhaps, but there are plenty of ways to “sort out” those that own utilities. Taking Thames Water – it loses per customer 187 litres of water per day. Ofprat the water “regulator” recently gave it a slap on the wrist (UKP 8.5m) . How about One UK pound per litre of water lost until it sorts things out? I am quite sure the owners would lose their appetite & would sell up.
In your dreams.
How prosecuting these companies ( chairman, directors and shareholders ) for obtaining money by criminal deception, they have been screwing the public for decades.
Marco is absolutely right. What they suggesting by moving the companies overseas is so that they can take advantage or investor protection in free trade agreements, i.e. they can then launch arbitration proceedings against the UK government to try and sue for damages if the feel their rights as an investor have been compromised following nationalisation.
Please read the article again. It’s not about tax havens:
“The UK BITs that remain in force range from those with China and Turkey to pacts with such countries as Swaziland, Nicaragua and Laos.”
I read it
It is about tax havens
Which tax havens do you think have bilateral investment treaties with the UK?
The USA
Netherlands
I suspect Singapore
And on…read the Financial Secrecy Index
Macquarie has some experience when it comes to listed water companies. This from the BBC last September:
“The Australian bank Macquarie has left Thames Water with an extra £2bn debt burden, a BBC investigation shows. The £2bn was borrowed by Thames Water in 2007 and 2010 but used for the benefit of the bank and its investors, which owned and controlled the UK’s biggest privatised water company.”
And this is the same company that the government flogged the Green Investment Bank to at a knock down price.
“Ministers missed out on tens of millions extra on the sale of the Green Investment Bank (GIB) in August, according to the spending watchdog. The National Audit Office said the £1.6bn paid in cash by the Australian bank Macquarie came in at the low end of the government’s valuation.” (Guardian 11 December)
Nice one.
Do you have a link?
Here you go:
http://www.bbc.co.uk/news/business-41152516
https://www.theguardian.com/environment/2017/dec/12/green-investment-bank-sold-too-cheaply-watchdog-says
And here’s another one from today:
http://www.afr.com/business/macquarie-infrastructure-fund-crashes-in-the-us-20180228-h0wtbh
Thanks.
We’re heading for a “corporatocracy”. Trade agreements already give companies power to take governments to court if their decicions reduce their profits. In Scotland Ineos is to challenge the SG ban on fracking.
How right you are Richard. Macquarrie are indeed saying that the fiduciary duties of capitalism ( as presently structured which is to say anti-democratic ) come first. How about your fiduciary responsibility is greater than that ; it is to do the right thing . This is precisely what is going on in the US at present with these companies that are severing their ties to the NRA . They have woken up to the fact ( and it is a fact no matter what that silly little man Milton Friedman said ) that they have a fiduciary duty above and beyond that to their shareholders to maximise profit. But this is also about power, let us never forget that . The NRA have been treated as all power maniacs are as being ‘ all-powerfull ‘ and then suddenly they’re not. I suspect James Dyson’s issue is frustration at not being treated like a guru like Bill Gates.
“The vast majority of the working class are not highly competitive, acquisitive, status-seeking or upwardly mobile and never have been.” “Oh yeah? And you’ve asked them all personally have you or did you read that in The Sun?”
Well thank god for that. We don’t want them getting above themselves, or perhaps you were joking?
Don’t think he was joking – just speaking for the working classes!
Or perhaps you missed the point completely , G Hewitt.
You could start from a premise where your not not looking to be offended or thinking that what “we” would or “wouldn’t want” has any remote relevance to what I said.
Then you might consider how feasible it is for “the vast majority” of working class people (or middle class people) to be upwardly mobile. That’s a bit like the government minister who felt that most people could be above average.
Now you may or may not want people on the whole to be pushy, pretentious, acquisitive and status-seeking. Thankfully, they aren’t. Given that we are now in 2018, with all that has transpired in the last 9 years I am also fairly sure that the term “aspirational” ( a tedious euphemism at any rate) is no longer seriously regarded as a positive term. Quite the opposite.
I was just pointing out, using your own quotes, where you cut someone down to size that what you had said was also nonsense.
I think a halt needs to be drawn here
Both of you add value to this blog
Shall we leave it at that?
How is it democratic to expropriate a company at a price set by government, rather than the markets?
That’s just theft by government decree. Democracy involves respecting people’s rights, and that includes right to property – which shares definately are.
I do not argue for taking people’s property without compensation
I do argue that the compensation must be appropriate
And I am not sure anyone is saying anything else
I dare say that I am a bit grudging on the G Hewitt thing but I respect your right and understand your reasons.
What I mean is that now that he has better explained his point about my (alleged) self-contradiction I think that could explain that away briefly and satisfactorily, make a distinction and resolve the misunderstanding.
Oh well, not too worry.
Rosemary –
“How is it democratic to expropriate a company at a price set by government, rather than the markets?”
Because markets don’t set a fair price for these things. They just don’t. If they did, Phil Green wouldn’t have been able to sell BHS for £1 to Dominic Chappell who then took £2.5m out of the company before the bailiffs came knocking. Professional investors and CEOs look after their own. I have absolutely no faith that “the market” (whatever the hell that actually means) has any ability whatsoever to value an asset fairly or in the best interests of the majority. Nationalisation of industries that are simply too important for the wellbeing of thepeople of this country to be left in the hands of people such as those I mentioned is, IMHO, a perfectly proper course of action. That would be one of the few occasions where the state would be best placed to be utterly fair – not just to the current shareholders, but to the UK at large.
As for shareholders, if they lose money on the deal, well… you can’t win every bet. Remember – investments can go down as well as up.
“That’s just theft by government decree.”
As opposed to whatever it is the energy companies have been up to since the 1980s? They’ve been rapaciously extracting money from the people of this country for the business end of 4 decades now. It’s excessive rent seeking and I call that theft by corporate decree. At least Governments are elected.
“Democracy involves respecting people’s rights, and that includes right to property — which shares definately are.”
I agree… but mostly with the first of your statements. Democracy is about respecting EVERYBODY’s rights – not just those few who are lucky enough to be able to provide capital so they can draw income without lifting a finger. That in itself isn’t a bad thing – but when it gets taken too far… when ordinary people can’t afford to turn the heating on in winter, when rent seeking causes inequality to the extent that ordinary people are denied access to the resources they need to feed, clothe, house and warm themselves, when THAT happens, the state has a duty to step in and stop it.
When a minority of people are causing such anguish and pain to the rest of the citizens of this country through inequality that lives are put at risk, I say that outweighs any material loss. Simple message – private management of vital services has failed. It’s lost its way and greed has prevailed. People are dying. It has to stop. I’m sorry if that costs the shareholders… but the current system is costing everybody else so much more.
Please try to see that.
Perfectly put Geearky. When will right wingers let go of their ludicrous belief in the ‘free market’? Markets are not always the best way of allocating resources to meet needs and wants. And since when did markets care about social justice? Some things are nest left to markets, others are not. Especially those where there is long term uncertainty, or concerns over justice and fairness.
How about selling a state asset for less than its value as has repeatedly happened? Is that not theft from you and I?
Flippin’ heck!
At least its not just me who gets a little carried away here at times! (Sorry – can’t do smileys).
PSR I just use colon right hand bracket 🙂
Oh yes – of course! Like this :)!
Got it.
Totally off topic here Richard, but why can I no longer see the links for twitter, farcebook and the likes?
Help me out here, is it my PC glitching, or has something gone wrong with the site? They’ve been missing for some time now.
Another off topic Q: What’s the difference between the deficit and day to day budget surplus? Osborne and others have been bragging today that there is now a budget surplus.
Is anyone else having this problem?
I can still see them….
But it’s always worth asking
If it is a widespread issue I will have it checked
Claire, it’s likely your firefox / chrome or whatever web platform you use security / cookie settings have changed and as a result the full links are now not getting through. I have the same issue, but the plus side is more privacy & less ads (on other sites. Richards, thank goodness is ad free). You can change it back through ‘settings’, accept all cookies and see if that works. You can always change them again if you get unexpected results.
I won’t do ads
I am sure I could make money but that’s not my reason for being here
Shocking as that might be to right wingers
@Windsorlass
Thanks for that. I think I would rather copy and paste than alter my cookie selection. I like not having ads pop up whenever I want to read something. I know Richard’s site doesn’t do adds, thank goodness, but to change for one appears to mean change for all.
Richard,
I re posted your comments about the possibility of these firms re registering as foreign offshore companies and had this question asked, which I’m hoping you can answer?
“I don’t understand why this would prevent us from nationalising them. Even if it’s illegal now, which I don’t think it is, we can change the law through the proper channels. Nobody is suggesting confiscation without compensation are they? Which I guess would be considered illegal under international law.”
Is he correct?
Geoff
The point is in the original article I linked to
The aim is to move to states from which a claim not just for fair value but for the loss of all profits could be made
In effect, the aim is to leverage power against the state using international agreements already signed that reinforce the power of the investor against the state
I think this can be circumvented precisely because moving to take advantage may negate the advantage
Thank you
Come to think of it there are some precedents with this sort of thing.
One that springs to mind is the case where Philip Morris tried to sue the Australian federal government for introducing laws for the plain packaging of cigarettes.
There are no ISDS provisions in the Australia/US free trade agreement (that’s another story) so Philip Morris opened an office in Hong Kong to try and take advantage of an old trade deal that the Australians had with Hong Kong.
Long-story-short, this cast enormous doubt on Philip Morris’ chances as even the secretive cabals that run the ISDS tribunals will tend to recognise that your case won’t do well if the company has obviously moved jursidictions purely for the purpose of litigation.
This was also a case where the issue was foreseeable. The plain packaging laws had been discussed and prepared for years. Philip Morris lost when the tribunal refused to hear the case:
“The 186-page judgement, unsealed on Tuesday, shows the tribunal rejected the claim at the first hurdle, finding Philip Morris had moved its Australian and Asian headquarters to Hong Kong for the express purpose of making the claim. With their judgement saying that:
“The tribunal cannot but conclude that the initiation of this arbitration constitutes an abuse of rights, as the corporate restructuring by which the claimant acquired the Australian subsidiaries occurred at a time when there was a reasonable prospect that the dispute would materialise and as it was carried out for the principal, if not sole, purpose of gaining treaty protection,”
https://www.smh.com.au/politics/federal/australia-versus-philip-morris-how-we-took-on-big-tobacco-and-won-20160517-gowwva.html
For those who may be further interested, this is gratifying:
https://www.theguardian.com/business/2017/jul/10/philip-morris-cigarettes-charged-millions-after-losing-plain-packaging-case-against-australia
And this is background:
https://www.theguardian.com/australia-news/2015/dec/18/australia-wins-international-legal-battle-with-philip-morris-over-plain-packaging
https://theconversation.com/australias-plain-packaging-win-over-philip-morris-should-take-the-heat-off-isds-52541
Thanks
Good work
I seem to remember that when the American copper companies were nationalised in Chile they demanded compensation.
After the sums were done they were presented with a bill. No doubt similar sums could be done here.
🙂