The Government of Belize has lost its legal battle in the US Court of Appeal, District Court of Columbia, against Newco, a company which had sued the Government to enforce a US$4.26 million arbitration award handed down in June 2008 in Miami over the termination of a 30-year contract to run the Philip Goldson International Airport – the country’s only international airport.
The award was issued with 8% interest compounded, which means that the Government could be on the hook for at least US$3 million more. To date, we have been unable to get an official figure from the Ministry of Finance.
The group of US-based investors who had established Newco in Belize in 2002, had originally threatened to sue for US$33 million, challenging a decision by the then administration of Said Musa to instead offer the concession deal (via a management agreement) to a consortium known as the Belize Airport Concession Company (BACC).
The Government had listed the Mena group of Companies; the Roe Group of Companies; Airport Investment Group Limited, led by Edward “Billy” Musa, Sr. (the then Prime Minister’s brother); International Global Investment Group Corporation, a U.K. investor represented by Mr. Santiago Gomez of International Services Ltd.; and Global Investment Inc., a group of medical doctors from Florida, USA, represented by Mrs. Melissa Mahler, as investors in the new airport deal.
Back in 2005, official documents indicated that Robert T. Wray, an attorney-at-law of Washington D.C., was listed as Newco’s secretary; and Carl Vercollone, a banker and the president of 42 North Structured Finance, Inc. of Boston, Massachusetts, was listed as Newco’s chairman. Shareholders were three American companies with equal shareholding: Airport Holdings, LLC, (formerly H&K Airport Holdings, LLC) of Washington, D.C.; 42 North Holdings Corp. of Boston, Massachusetts; and LCG Airport Holdings, LLC of Washington, D.C., which had acquired 33% interest from LH Holdings, Inc. of California, USA. Lufthansa was not listed as an investor in Newco.
The Government had alleged that serious misrepresentations were made with respect to the role of Lufthansa Consulting and others in the project. The GOB said that it had relied heavily on the representation of the prominent roles that Lufthansa and others would be playing in investing in the project.
Former Minister of Investment Eamon Courtenay, who wore the cap of director of BELTRAIDE, had told Amandala that the Lufthansa officials had offered to take over the airport and they were asked to invest $200 million in the first 10 years and $300 million over the 30-year life of the agreement. Government had not publicly explained why Lufthansa was never a party to the deal.
Instead, in 2002, Newco Limited signed the agreement with the Government of Belize to operate and develop the country’s international airport.
The US federal court which recently ruled on that the arbitration award should be enforced said that, “Less than a year later, Belize repudiated the agreement” and “Newco invoked the agreement’s arbitration provisions.”
“Belize agreed to pay the award immediately, subject to two conditions. First, Belize insisted on paying the award in Belize dollars rather than in U.S. dollars as required by the agreement. Second, Belize refused to pay Newco without first subtracting any unpaid taxes owed by the company. And according to Belize, Newco owed the Belize treasury approximately US$2.7 million,” the court’s ruling said.
It added that Newco fought the Government of Belize in the U.S. District Court, for the District of Columbia. Meanwhile, the Government of Belize successfully launched an anti-injunction suit in the Belize Supreme Court, staying legal proceedings in the US.
The Belize Supreme Court later declared that the Government could subtract the unpaid taxes and pay the remainder of the award in Belize dollars, as the Government had argued. However, Newco went back to US courts to get the arbitration award enforced.
According to the US appeal court, Belize moved to dismiss the suit on a variety of grounds, including international comity and public policy. However, the US court rejected Belize’s position and enforced the award which could be pursued against assets the Government of Belize holds in the US.
The US Court of Appeals has affirmed that ruling, in a decision publicized this week but handed down on May 13. The court rejected the grounds which Belize had put forward to argue that the award should not be enforced.
The court said that that under the Federal Arbitration Act, US courts must enforce foreign arbitral awards, unless they find grounds not to do so in the context of the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards.
“By design, the New York Convention allows investors to choose to resolve disputes with states through neutral tribunals in neutral countries,” the court added.Amandala