The Caribbean Court of Justice ruled last month that the British Caribbean Bank (BCB), formerly the Belize Bank of the Turks and Caicos Islands, can proceed with foreign arbitration proceedings against the Government of Belize in a dispute over a US$22.5 million loan with the bank, even while the matter is under litigation in Belize courts.

Even before he became Prime Minister, Hon. Dean Barrow had taken the position that his administration would not participate in foreign arbitration to which his predecessor, Hon. Said Musa, had agreed in a series of agreements with the Ashcroft Alliance.

Barrow had said that rather than expending public resources overseas to defend those cases, Government would fight when the litigants try to enforce their awards on the home front.

However, after the CCJ ruling last month, Barrow told us that Government will participate in the foreign arbitration proceedings over the BCB loan, which the Government had acquired when it did a compulsory acquisition of Belize Telemedia Limited (BTL) more than three years ago.

The Prime Minister said that right after acquisition of BTL, the company had sought to borrow the money from First Caribbean International Bank to pay off the BCB loan and it was FCIB bankers at the Barbados head office who took the position that they could not give BTL the loan, because the loan which they wanted to repay was, in their view, illegal.

“We were perfectly intent to pay off that money,” said Barrow, adding that action was later filed in the Belize courts challenging the legality of the said BCB loan.

Barrow said that he has no doubt BCB is out of pocket, but the argument may well be that authorities would need to go after the directors who sat on the BTL board at the time that transaction was approved.

“It gets a little complicated,” said Barrow.

He told us that Government will fight at arbitration on the basis that the loan is illegal.

As Government had previously indicated, BTL had conveyed that it had gotten legal advice indicating that it is contrary to the Companies Act for a company to get a loan to purchase its own shares.

Barrow said that Government will have to be represented at the foreign arbitration proceedings, which Senior Council Denys Barrow has indicated to us would be done via the London Court of International Arbitration (LCIA). The Prime Minister also told us that he will discuss the matter with Cabinet.

Barrow also told our newspaper that there was also the arbitration related to the Universal Health Services, now the Belize Health Care Partners, for which the bankers were awarded BZ$44 million, plus 17% interest, which, Barrow said, was part of the terms of the loan. The Musa administration had guaranteed a $30 million loan that UHS had gotten with Ashcroft’s Belize Bank. The Barrow administration had, likewise, maintained that the loan was illegal, but the Privy Council found otherwise.

It is towards this loan, issued in 2007, that the Musa administration attempted to pay a portion of the Venezuela Housing Grant; but the Barrow administration challenged that move and got the money paid back to the Government’s coffers.

The LCIA ruling in the UHS case was handed down against the Government of Belize, and it found that Government was obliged to pay.

According to Barrow, if Government is forced to repay such liabilities, it would have to see how it can use the additional US$70 million allowed under the terms of Super-bond II to help settle any liabilities.