Do the Panama Papers matter? A University perspective:

James Ressel, Senior Lecturer in Law at The University of Northampton shares his thoughts on one of the most talked about news items this week:

Over the last few weeks The Guardian newspaper has published findings based on its analysis of the leaked Mossack Fonseca database containing a huge amount of financial and personal information about its clients, their clients’ various offshore companies and the associated ‘asset protection’ arrangements.

Mossack Fonseca, a large international law firm based in Panama, offers a range of legal services focusing on what it euphemistically calls “asset protection, tax and estate planning…” offering inter alia “… a wide range of structures to meet the individual needs of each client, using vehicles such as Trusts, Private Foundations, Onshore Midshore Structures, among others.” [1] It can open bank accounts and offer escrow services. [2] It can act as a “… Registered Agent [offering]…jurisdictions that are tax exempt regarding any commercial activity or operation carried out outside its jurisdiction.” [3]

The quantity and quality of the leaked information [4] is huge and wide ranging. It includes “11.5m emails, passport scans, contracts, share registers and even sound recordings” [5] and has taken many months for journalists to process. I am not aware of any claims that the information is inaccurate, false or has been forged.

We may ask why this should concern us, is this not a matter solely for the technocratic lawyers and accountants? What do we care about “asset protection” and “tax planning”? Rather technical terms representing legal and economic techniques designed to minimise the real amount of income tax and other taxes, individuals and companies pay to the governments where they work and live.

It matters because the release of such private and sensitive information evidences the systematic, organised economic and amoral deceit and financial pilfering committed against the general population by a very small group of financiers and politicians. The global scale of the enterprise concealed behind a distant and opaque facade of respectable legality and order, deeply offends our sense of social justice. It amounts to nothing more that the hypocritical one-way harvesting of money, human capital and ingenuity for individual personal gain, spelling the end of our shared understanding the social contract and its concomitant sense of justice.

Currently, the generally accepted model of social justice is based on the principle of laissez- faire, the notion that the autonomous but atomised individual [6] is the key to just and fair social organisation, which is best articulated if the individual is allowed unfettered (meaning free from state regulation) freedom to enter into economic transactions with others.

Thereby, the individual only becomes an actualised social being (i.e. a consumer) when recognised by the idealised competitive market. The market, which is nothing more that the aggregation of the multiple individual transactions, operates dispassionately but, we like to believe, naturally, in analogy with biological principles of natural evolution, sacrificing a particular individual organism as necessary to the abstract ideal of the ‘trickle down’ economy.

The Panama Papers show the real social consequences of the un/just violence of the force of law and economics hypocritically harnessed to promote the ideology of laissez- faire and the market. We may have personal sympathy for the named individuals, and perhaps even those still in hiding, blinking, but not as yet blinded, in the harsh light of the revelations, but cannot but be deeply offended, betrayed and angry at the brazen legally sanctioned sleight of hand played on us all. This is not what is meant by society driven by principles of social justice.

In a recent interview, Ed Miliband said that:

“I certainly understand why he defended his dad and that it must be incredibly upsetting for his mum. […]But for 30 years, since Reagan and Thatcher, the basic view has been, ‘Be nice to the super-rich and their wealth will trickle down.’ That is the big lesson of Panama for me. It doesn’t trickle down; it gets stashed.” [7]

‘Stashing’ cash in extra-jurisdictional spaces, out of reach governments and those that helped generate the cash through work and spending takes to its logical conclusion the reported principle espoused in the late 1980s by the infamous business woman Leona Helmsley that:

“We don’t pay taxes. Only the little people pay taxes.” [8]

The Panama Papers revelations tell us that if we believe in the principle of rule of law as an agent of social justice, we cannot accept ‘law-light’ as the reduced conception of law as the technocratic handmaiden of the market. We must not accept law devoid of any real material significance, law as nothing but an entertaining and to some degree interesting and intellectually challenging abstract game of social chess. To do so would mean we pay a too high a price in human pain, un-freedom, inequality and suffering.

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[1] http://www.mossfon.com/service/mossfon-trust-corporation/

[2] The word escrow can be traced to its Old French sense of a ‘scrap, tatter or single parchment, or piece cut off’. Here the idea is that the veracity of a transaction is confirmed by the correspondence of the two torn pieces. The piece carried by one person matches the tears of the other piece to make a whole, rather like using a perforation in a theatre ticket, for instance, to verify the delivery of the promise to perform. In the mercantile period, to facilitate credit trade between strangers, this idea was abstracted into the notion of a trust. The deed, promise to pay, or even money is delivered by A to a trusted third party to hold on trust against the future performance by B of their agreement with A.

[3] http://www.mossfon.com/service/company-formation-services/

[4] Garside writes that: “Some 80 gigabytes of data about the firm’s [Mossack Foseca] customers had been received by [the Süddeutsche Zeitung]… in February 2015”, over time the journalists received 2.6 terabytes of information. Juliette Garside, 16 April 2016, The Guardian, ‘Panama Papers: inside the Guardian’s investigation into offshore secrets.’ At http://www.theguardian.com/news/2016/apr/16/panama-papers-inside-the-guardians-investigation-into-offshore-secrets

[5] Juliette Garside, 16 April 2016, The Guardian, ‘Panama Papers: inside the Guardian’s investigation into offshore secrets.’ At http://www.theguardian.com/news/2016/apr/16/panama-papers-inside-the-guardians-investigation-into-offshore-secrets

[6] Michel Houellebecq, Les Particules élémentaires, 1998, Flammarion, Paris.

[7] Carole Cadwalladr, 17 April 2016, The Guardian, ‘Ed Miliband: Panama Papers show that wealth doesn’t trickle down. It gets stashed.’ At http://www.theguardian.com/global/2016/apr/17/ed-miliband-panama-papers

[8] 12 July 1989, New York Times, pg. B2: Associated Press at http://www.barrypopik.com/index.php/new_york_city/entry/only_the_little_people_pay_taxes_attributed_to_leona_helmsley/