Another round of legal battles – taxpayers will foot the bill again!

The Ashcroft group and the Barrow administration are geared up for another round of legal battles, after the Government of Belize this week took full control of the International Business Corporation (IBC) Registry and the International Merchant Marine Registry of Belize (IMMARBE), which have been under the control of British billionaire Michael Ashcroft and Panamanian investors with European connections since 1990 and which are operated out of the Marina Towers in Belize City.

Not only did the Barrow administration take control of the registries, putting Acting Financial Secretary Marion Palacio in place to act as interim registrar, but it further went on to issue tax assessments totaling $30 million against Belize Investment Services Limited (BISL) – the company which has held the management contracts for the registry dating way back to 1990 – while Belize’s first premier, Rt. Hon. George Price, was serving his second term as Prime Minister and also as Minister of Finance.

BISL said it will sue for US$60 mil

For its part, BISL has said that it will “vigorously defend its contractual rights and pursue its claim for damages to the highest level of the legal system in Belize and will exercise all options available to it to vindicate its rights.”

Barrow said at Wednesday’s press conference that the management contract the Musa administration had with BISL would no longer be renewed.

“This flagrant breach of contract now exposes the Government to yet another expensive litigation which will be saddled on the back of Belizean taxpayers. The Government will become liable to BISL for an amount estimated to be in excess of 60 million United States dollars in damages with obvious implications for the recently concluded super-bond negotiations,” BISL said in a statement released on Tuesday.

“I don’t care! I see them making threats about how many millions of dollars they are going to sue for. When you look at what was collected over the last few years, the figure they are talking about is outrageous and laughable, but in any event that they will seek legal recourse, that is their right, and we say ‘Bring it on!’ because there is no way in the world that we will allow this abuse to continue, so as to endanger the economy of this country,” Barrow responded.

Agreements with “astonishing provisions”

Barrow indicated that the June 11, 1993, agreement took the place of two previous agreements, which, he said, had “astonishing provisions” saying that BISL, which was a joint venture company owned by Ashcroft’s Waterloo Investment Holdings Limited and Morgan & Morgan, shall not be subject to any measure or measures of performance, and Government will have no authority to carry out any such performance assessment or to determine whether it is, in fact, complying with the agreement, while exempting BISL from liability for any failure to provide any or all of the services in relation to the agreement.

Barrow also pointed to exemptions from government taxes, fees and assessments.

“I don’t know who gave the executive any [such] power, absent coming under law by way of a development concession or coming to House,” said Barrow, indicating that Glenn D. Godfrey was Attorney General at the time.

The original agreements were actually made under Price, who demitted office in 1993 after serving his second term in office. The substantive 10-year agreement was signed on June 11, 1993, just weeks before Belizeans went to the polls on June 30, 1993, electing the United Democratic Party to serve the next five years.

“The reason for giving a new agreement, during the interregnum between the calling of the elections and the actual voting when only three years had run on ten-year agreements remains a mystery to me,” said Barrow.

The Prime Minister said that in that first agreement, the government purported to exempt BISL from taxes, but the executive has no authority to relieve anybody from income or from business taxes. Therefore, said Barrow, the Commissioner of Income Tax has recently issued an assessment to BISL for BZ$30 million, for the period during which they were operating and paid no income taxes.

BISL, which takes the position that the Government takeover of the registries is “illegal,” “unmerited” and “without justification,” said that “…BISL had not been taxed throughout the 20 years it has operated the Registries. This is clearly another unlawful and arbitrary act by the Government against BISL.”

The contractual dispute

Whereas the Barrow administration has taken the view that the BISL management contract came to an end on Monday, June 10, BISL has said that it has “a legally enforceable contractual right to operate and manage these two registries on behalf of the Government of Belize until June 2020.”

On May 6, 2013, the Government of Belize wrote to BISL indicating that it would like to meet on Wednesday, May 15, 2013, to discuss the handing over of the registries to the Government. BISL replied on May 9 and presented a letter of agreement dated 2005, claiming they have an extension to the 1993 contract, which extends the contract to 2020.

GOB’s Registrar for this sector has been Gian Ghandi, legal advisor in the Ministry of Finance, and he told Amandala that in 2003, there was a dispute between the then People’s United Party administration of Said Musa and BISL, over whether the agreement should have been extended.

Ghandi had written a letter on June 9, 2003, indicating that “there has been a fundamental change of circumstances since the Agreement was signed in 1993 and that this affects the continued validity of the agreement.”

Ghandi also indicated that at the last meeting of the International Financial Services Commission (IFSC) which oversees that sector, they had agreed to only a short contract extension of two months with effect of June 12, 2003.

However, said Ghandi, the registries continued to be under the control of BISL, although there continued to be a back and forth over the validity of the extension.

Money laundering and IUU fishing

The central issues, according to Ghandi’s 2003 letter, had to do with the fact that Government had enacted new legislation which encapsulated anti-money laundering measures, and “various powerful international bodies viz., the Financial Action Task Force (FATF), the Caribbean Financial Action Task Force (CFATF), the International Monetary Fund (IMF), and the Organization for Economic Cooperation and Development (OECD), in their respective reports, have urged the Government to retrieve control of the two Registries.”

During that era, Belize had been repeatedly blacklisted as a tax haven by the OECD, and in recent years, it has avoided sanctions by entering into tax information agreements with several jurisdictions. However, last year, the EU served notice on Belize that it could face sanctions over Belize-flagged ships operating on the high seas over illegal, unreported and unregulated (IUU) fishing issues, Barrow said.

He told the press that he would not take the chance of waiting to find out whether those sanctions would just be against Belize’s aquaculture exports, since Belize exports bananas and sugar to the EU as well. The move, Barrow thus insisted, is also necessary to protect Belize’s trade interests in the EU.

Ghandi’s 2003 letter also identified IUU fishing as one of the concerns that had been raised by the US Coast Guard, as well as the EU – which, he said, had placed a ban on Belize’s agricultural products entering the EU market.

Secret deal or not?

Ghandi told our newspaper that his position, recommending that the Government denies the extension of the BISL contract, remained unchanged over the years, and he told us that he was unaware that in March 2005, the Musa administration issued a letter of extension to BISL for another 7 years, beyond the 2013 date.

Speaking on Wednesday, Prime Minister Barrow said that it was not until Philip Osborne of the Ashcroft group sent him a copy of the letter that he was aware of its existence.

Amandala also checked with then Financial Secretary, Dr. Carla Barnett, and she told us, “Am afraid I don’t have a recollection of this matter. It is quite a few years ago.”

At his press conference on Wednesday, Barrow was asked about a letter from then senior financial advisor, Joe Waight, acknowledging receipt of a US$1.5 million in consideration, for the granting of the extension, and Barrow said that if that were so, Waight, currently the Financial Secretary, must have had a memory lapse; because he had indicated that he was not aware of a contract extension.

Musa told Amandala today that the matter was ventilated in Cabinet, including a decision to use the US$1.5 million to fund the expansion of schools in rural Belize.

Then Deputy Prime Minister, Johnny Bricneo, told our newspaper that he knew nothing of the agreement to extend the management contract for the registries.

Then Cabinet Secretary Robert Leslie told our newspaper much the same: “I do not recall that any agreement regarding IMMARBE or whatever it is was taken to Cabinet. I was there and I don’t think I missed a meeting.” Leslie did say, however, that not every decision taken by ministers of government goes through Cabinet.

Prime Minister Dean Barrow indicated that former Chief Justice Abdulai Conteh had issued a decision in which he spoke of the need for such agreements to fall in line with the proper laws and procedures.

“In so far to that secret agreement purported to extend the duration of the original ’93 agreement, beyond 2013 it was wholly invalid as it was patently contrary to several of the applicable laws, including but not limited to the Finance and Audit Act, the Financial Orders, the Stores Orders and the Control of Expenditure Handbook,” said Barrow.

Consequently, Barrow said, they wrote BISL on June 4, 2013, rejecting the March 24, 2005 agreement.

“A pack of lies:” Musa says

Musa told our newspaper, in response to PM Barrow’s comments on Wednesday that they are: “…a pack of lies – that’s what I can tell you. There was no such thing as a secret agreement.”

In our interview with Musa today, he told us that he doesn’t recall Ghandi saying the renewal should not be granted.

“The Ghandi letter was calling for us to renegotiate before the extension took place and in fact, it did take place,” Musa added.

He said that the 2005 renewal and extension to 2020 was vetted first of all by the Ministry of Finance, the Attorney General’s ministry, and senior public officers.

“We were able to secure a consideration of US$1.5 million for this seven-year additional extension. That money was used indeed for the expansion of the primary school infrastructure program,” Musa told us.

Yesterday, Barrow said that there is a record of Government receiving a US$1.5 million at the Central Bank around that time in 2005, and Government will reimburse those funds to BISL.

Why the sweeteners?

In its statement Tuesday, BISL said it had not paid taxes for 20 years. We asked Musa to explain GOB’s rationale for giving the extent of tax concessions it did, to which he replied: “This is an old argument that you and I perhaps have gotten into many times, as to why Government has given so many incentives to the private sector. Of course it still continues to this day with the change of government, it has made no difference…”

Musa said that this is how investment is attracted to the country.

“In this particular case, the reason for the blanket extension, I would say, was to take into account the fact that this was an entirely new innovative industry brought into Belize – it did not exist before – it was wealth creation, or revenue creation that did not exist before and in order to get these people – the company and its employees – to do the necessary work, to do the investment at no cost to government you have to offer these arrangements or else they go somewhere else.”

We asked: What about the 60-40 arrangement?

“We could argue about that. Shouldn’t it have been 50-50, or whatever. But that’s the way it is, that’s the way it was. And I notice that for the past six years I didn’t hear a grumble, a word of complaint from Mister Barrow or any member of his government while they received their 40-odd percent, 40-odd cents on the dollar,” Musa said.

The bigger picture

Musa said that he does share the concerns that Barrow raised over IBCs and money laundering issues, as well as IUU fishing on the high seas.

“The Europeans have been complaining about illegal fishing by various flagged vessels of various countries. We have certainly in our time worked through these things with them and we were able to stave off, if you like, any sanctions whatsoever.

“In the case of the IBC, it’s perhaps even worse because the right industrial developed world, in particular UK and US, have come to a decision that they are going to wipe out international offshore services in every country – except in their own, of course, and the few that they can’t really pressure… In fact, even Mexico I understand is talking about joining them in that regard,” Musa told us.

Musa said that whereas as a Belizean and as a member of Parliament, he is concerned that Belize’s exports to Europe could be threatened or curtailed, there was, he said, “no need for this drastic action” and added, “I am wondering what really is the motive.”

A BTL link?

On Wednesday, Barrow noted that the March 24, 2005, letter to extend the management contract from 2013 to 2020 was signed by Musa the day after he signed a shareholding agreement with the Ashcroft group for the Belize Telemedia Limited, via Ecom. Barrow questioned whether the letter extending the registry agreement was not part and parcel of a larger set of concessions Musa made to Ashcroft.

Responding to this allegation, Musa said, “I see only a sinister allegation being made by the Prime Minister. I can say categorically there was absolutely no connection between that BTL issue and this issue.”