The British Virgin Islands has sworn in a new leader, replacing former premier Andrew Fahie who was arrested in the US on drug-smuggling charges last month.

Premier Natalio Wheatley became the territory’s new leader after a vote of no confidence in Fahie was passed.

He said he hoped the day “will be remembered as the day we began a new era of democratic governance”.

Fahie, 51, was detained in Miami in April over an alleged conspiracy to import a controlled substance and money laundering in an operation led by the Drug Enforcement Agency (DEA).

The territory’s director of ports, Oleanvine Maynard, was also arrested.

The string of islands inhabited by 35,000 people east of Puerto Rico is currently under a 2007 constitution giving it limited self-governance under a Governor who is the ultimate executive authority as the representative of the Queen.

An inquiry into corruption in the territory, led by retired judge Sir Gary Hickinbottom, found that the people of the British Virgin Islands have been “badly served” by its government and suggested the UK take direct control of the territory.

In the report, published on April 4, Sir Gary recommended the Governor take direct rule of the territory for two years, stating: “Almost everywhere, the principles of good governance, such as openness, transparency and even the rule of law, are ignored.”

The inquiry found that elected officials “can and do make decisions – which expend huge sums of public money and affect the lives of all those who live in the BVI – as they wish, without applying any objective criteria, without giving any reasons and without fearing any comeback”.

In a statement made in April as acting premier, Mr Wheatley said he was “very concerned” about the recommendation.

Mr Wheatley said: “What this would mean in real terms is that there would be no more elected representatives who represent the people of the districts and the territory in the House of Assembly where laws are made for our society.”

After he was sworn in as the territory’s new leader, Mr Wheatley said his government’s main priority was the implementation of the report’s recommendations “within a framework of democratic governance”.

“I am well aware that a decision has not yet been made by the United Kingdom on the report’s recommendation for a partial suspension of the constitution,” he said.

“Nonetheless, we will continue to engage the Governor on how best the National Unity Government can work in the best interest of the people of the Virgin Islands to deliver reform.

“We are a willing partner and ready to take the process forward in partnership without delay.”