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Botched airport deal – GOB must pay NEWCO US$4 million plus

GeneralBotched airport deal - GOB must pay NEWCO US$4 million plus
The Miami arbitration tribunal that held hearings in January 2008 in the dispute between the Government of Belize (GOB) and NEWCO Ltd. over the privatization arrangements of the Philip Goldson International Airport, this week ordered GOB to pay NEWCO US$4.26 million, including US$2.6 million in damages for wrongfully terminating the concession agreement it signed with the company in November 2002.
 
The new administration has taken the position that it has to honor the ruling and find the money to pay, because their hands have been tied by the Musa administration, which entered the deal with NEWCO five years ago and then terminated the exclusive contract and gave the same deal to their cronies – a move that is now costing taxpayers almost BZ$10 million, in these austere times.
 
Amandala has obtained a copy of the 54-page ruling delivered on Monday, June 23. It reveals that the saga dates way back to 1999 – when the People’s United Party (PUP) administration, under the first term of Said Musa – decided that they would privatize the airport and bring in Lufthansa Consulting to modernize what had been a laughing stock to some tourists.
 
Even though most people would have lauded plans to upgrade Belize’s only international airport, today, the Government of Belize, under the administration of the United Democratic Party, is faced with the dire consequences of a botched deal. What went wrong with the transaction? During the arbitration proceedings, the arbitrators got to hear from both parties, as well as the Belize Airport Authority (BAA), named along with the Government of Belize as respondent in the case.
 
Judd L. Kessler, Esq., of Washington was the arbitrator chosen by NEWCO; Prof. Albert Fiadjoe of Barbados was the arbitrator chosen by GOB; and Prof. J. Martin Hunter was the arbitrator chosen by both arbitrators as the third person on the panel to settle the dispute. The proceedings were conducted under the United Nations Commission on International Trade Law (UNCITRAL) Arbitration Rules.
 
For its part, the Government of Belize representatives – led by former BELTRADE executive director and subsequent Ministry of Investment of Foreign Trade/Foreign Affairs, Eamon Courtenay – contended that things kept going wrong with the investment arrangements. (Affidavits for Belize were sworn by Amalia Mai, Eamon Courtenay and Michael Tewes.)
 
Firstly, the then Government contended that the Inter-American Development Bank (IDB), which was supposed to provide initial financing for the privatization, allegedly took too long to finalize the loan transaction.
 
They said they had to then turn to Lufthansa Consulting (LC) – which touts itself to be an independent subsidiary of the widely known Lufthansa Aviation Company, a German corporation. Government entered into a service contract with LC, and later decided to give them a 30-year exclusive concession to run the airport. But even before the arrangements were solidified, one of the major partners in the LC group went belly-up, major directors moved on to new jobs, and the tribunal noted that even though those changes made GOB uneasy – GOB still proceeded with the arrangements. The frustrations on Government’s side continued to mount, resulting in what arbitrators noted to be “a crisis of confidence.” The Government terminated the agreement in October 2003.
 
A few weeks later, the Government of Belize announced a new and almost identical deal with a group of well-connected Belizean business people. Four days later, NEWCO – the local arm of LC – informed the Government of its intent to sue for US$33 million.
 
Despite that threat, Government proceeded to terminate NEWCO, and signed a new concession agreement with BACC – the Belize Airport Concession Company.
 
NEWCO complained to the arbitrators that 10 days after GOB wrongfully terminated their contract, they announced that they were awarding the deal to a local group comprised of local companies owned by Samira Musa (niece of the then Prime Minister Said Musa), Pablo Espat, Belize Airport Authority chairman), David Espat (brother of Minister Mark Espat), and Chris Roe. The directors of the new group, they said, included Musa’s brother, Edward “Billy” Musa.
 
NEWCO told the arbitration panel that it had expert assessment that the termination caused it to lose US$46.9 million in cash flow as of October 2003. But in September 2003, it had offered to settle with the Government for US$2.6 million – and that is the basis on which the arbitration panel decided the extent of the damages they awarded to NEWCO. They tagged on to that US$1.16 million in interest (calculated at 8% compounded quarterly), as well as US$500,000 in legal fees.
 
The tribunal also ordered GOB to pay almost US$10,000 to BAA for its expenses in participating in the arbitration – US$4,980 to cover hotel costs at the Hilton and airfare for Edwin Flowers, attorney-at-law in the Musa and Balderamos law firm, as well as US$5,000 in legal fees for the attorney.
 
It noted that BAA was being awarded 1/6th of the bill for those from Belize, so we extrapolate that figure to determine that on the Government side, it cost them roughly US$60,000 to defend itself in the arbitration.
 
In the concession agreement, the then Government under Said Musa agreed to final binding arbitration in Miami under UNCITRAL rules.
 
Interest of 8% compounded quarterly will continue to accrue on the bill as long as Government does not pay. The tribunal stated that GOB must also reimburse NEWCO for the deposit it made at the start of the arbitration process three years ago. The value of that deposit was not disclosed.

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