BCB Holdings Limited, the parent company of the Belize Bank Limited, controlled by British billionaire Michael Ashcroft, is asking the Belize Supreme Court to enforce a $40 million arbitration award against the Government of Belize – won in 2009 over the settlement deed and amending agreement given by ex-Prime Minister Said Musa, allegedly to get the Ashcroft group to abandon litigation against the Government over the shares in Belize Telemedia Limited (formerly Belize Telecommunications Limited.)
To get the Ashcroft group to drop litigation, Government would in turn forgo litigation to recover outstanding business tax arrears from the group, Musa had claimed, as he created a special tax carve-out. If BCB Holdings has its way now, that decision could cost taxpayers $40.82 million and counting.
The court cannot conclude in this case that the arbitral award is not final and binding, Eamon Courtenay, SC, attorney for BCB, told the court.
The central issue is whether the award should be enforced against the Government of Belize, said Justice John Muria, hearing the case today, Monday, June 7.
“It is unthinkable that the [then] Prime Minister can unilaterally make a tax concession outside of and contrary to the tax laws of Belize, and to add insult to injury, in secret at that,” attorney for the Government of Belize, Michael Young, SC, told Justice Muria.
“By the signature of one man [Musa]…” said Young, Musa not only gave tax exemptions based on current years, but also included “futuristic tax preferences.”
This is reflected in the fact that the $40 million arbitration award counts alleged losses by Belize Bank and BCB up to the year 2020 – more than a decade beyond the tribunal hearings.
In March 2005, Musa claimed that he had to enter into the Belize Bank tax set-off agreements – deemed confidential – for getting BCB (then Carlisle Holdings) to drop litigation against the Government over its right to repurchase shares in BTL.
Rewind to December 2003: The then Musa administration re-nationalized BTL by first purchasing Carlisle’s 51% stake in BTL and packaging it with Governments’ shares, including a large block of Social Security shares.
The total package of shares – 84% of BTL – was then sold to Innovative Communications Corporation on promissory notes, one of which went into default when ICC owner, Jeffrey Prosser, failed to pay.
Fast-forward to 2008: The Dean Barrow administration is in power, and takes the position that it will not honor a string of agreements, called the accommodation agreements, which Musa gave to the Ashcroft group, purportedly to settle legal disputes over the BTL shares.
The parties, GOB and the Ashcroft group of companies, were in constant litigation over a series of judgment summonses issued to reclaim tax arrears dating back to 2006. The Ashcroft companies, which maintained its claim to the tax set-offs, reacted by going to foreign arbitration through the London Court of International Arbitration (LCIA).
In August 2009, the Barrow administration tells the people of Belize that in order to end the litigation with the Ashcroft group, tied to the dispute over BTL, and to restore stability in the telecommunications sector, Government had decided to re-nationalize BTL yet again – this time by passing the requisite law in the National Assembly to purchase 94% shares deemed then to be under Ashcroft’s control.
That was not the end of the legal wrangling, however. Only last month, Prime Minister Dean Barrow said that the most recent estimates communicated to Government indicate that the Ashcroft group, now appearing under Hayward Charitable Trust and Dunkeld of Turks and Caicos, are taking GOB on for nearly $1 billion in compensation for BTL, including the value affixed to the accommodation agreements.
This amount is aside from the $40.82 million which Young quoted to Supreme Court Justice Muria as the arbitral award for BCB Holdings.
According to Young, BCB had told the arbitration tribunal that the Belize Bank settlement deed and its amendment constitute “substantial savings” for the claimant. The arbitration panel granted BCB Holdings $14 million for historical losses between 2006 and 2009, and another $26.82 million for FUTURE LOSSES, based on the fact that the Belize Bank would retain its status as a PIC (Public Investment Company) bank until 2020.
As a PIC company, Belize Bank was paying an 8% tax rate contrasting with the 15% levied on regular banks, until the Barrow administration hiked the PIC rate to 12% in 2008.
Getting into the details of the agreement, Young demonstrated that in the special tax arrangement, Musa agreed to allow BCB to make quarterly business tax filings, when every other business is supposed to file monthly. Other provisions in the agreement, including the rate of tax, were also specified in the agreement and a cap was placed on the amount of tax Government could collect from the bank.
Attorney for BCB, Eamon Courtenay, SC, argued in court that BCB had met the two requirements to have the $40 million arbitral award enforced: it has provided a duly certified copy of the arbitral award and a duly certified copy of the arbitration agreement.
Having satisfied the statutory requirements, the court should enforce the final arbitration award, subject to the defenses raised by the Government, he added.
Courtenay told the court that the Government had agreed to arbitration and did not dispute the arbitration agreement; what it did take issue with was the matrix of the Belize Bank settlement deed and its amendment.
He pointed to the defense of former Attorney General Wilfred Elrington that the final LCIA award ought not to be enforced because it was in respect of matters that are not to be settled by arbitration. He noted that Elrington did not provide one scintilla of evidence to specify what matters he was referring to.
In his client’s view, Courtenay argued, whether the agreements in question are valid or not – although he contends the agreements are valid – the arbitration agreement is separate and remains binding. The LCIA panel did consider the question of whether it has jurisdiction over the case before making its ruling, Courtenay noted.
“It would leave only the public policy ground as being live between the parties,” Courtenay contented.
Young insisted that the court should not enforce the LCIA award: “The enforcement [of the $40 million award] would be contrary to Belize law and public policy.”
There have been special acts creating special tax regimes for designated companies. Young set out the case of two prominent companies, Mollejón in 1994 and BELCOGEN/BSI in 2005 – the same year of the BCB contract. In these cases, there were special tax provisions but unlike the Belize Bank agreement, they were taken to the National Assembly and, as stipulated in law, published in the Government Gazette and not marked confidential.
Attorney Young noted that the Musa agreements with BCB were open-ended, and it is natural to assume that they are to continue forever, if their terms are to be accepted. While the current PIC status of the Belize Bank expires in 2020, the law does allow another 30-year extension, Young observed.
(Under Ashcroft’s control, BTL won an LCIA award against the Government of $38.5 million resulting from a dispute over the same accommodation agreement that spawned the Belize Bank settlement deed and its ensuing dispute. An injunction remains in place for that award.)