By Alistair Smout
LONDON (Reuters) -Britain on Wednesday said it had agreed a comprehensive plan to reform the governance of the British Virgin Islands without direct rule from London at this stage after an official report found systemic dishonesty in the British overseas territory.
While an inquiry in April had recommended the BVI should have its constitution suspended, its elected government dissolved and effectively be ruled from London, Britain said it wanted to give a new government a chance to implement reforms.
However, Britain said it retained the option of a governor-led administration - effectively suspending BVI's constitution and handing rule to the British government - if there was not enough progress in improving governance over the two year plan.
"I believe, in the first instance, the new government should have an opportunity to demonstrate their commitment to reform through the implementation of the 48 (inquiry) recommendations and the further measures they have proposed," Britain's foreign minister, Liz Truss, said in a written statement.
"If it becomes clear that this approach is not delivering the reform the people of the BVI want and deserve we will take action. This may require the swift implementation of the final Report recommendation."
The scandal over the governance of the territory has seen the removal of ex-premier Andrew Fahie after he was arrested in Miami on charges of alleged money laundering and conspiracy to import cocaine in April.
He has pleaded not guilty to the charges.
The arrest came the day before the highly critical report into governance was published. Truss said Fahie's removal and the creation of a new government marked "significant developments" since the publication of the report.
Activists had protested the idea of direct rule by London, and new premier Natalio Wheatley had said the territory could address its problems without suspending the constitution.
Wheatley gave a news conference alongside governor John Rankin and said that Wednesday's announcement was "in everyone's best interests".
"What we've in essence done today is we have been able to have an opportunity to have democracy continue in the Virgin Islands and make reforms that we all know are correct," Wheatley told reporters.
(Reporting by Alistair SmoutAdditional reporting by Zarrin AhmedEditing by Mark Heinrich)