The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A Bahamian accountant with experience of US Chapter 11 procedures yesterday said the judgment dismissing Baha Mar’s bankruptcy protection had been written in such a way that the developer “cannot appeal”.

Craig A. ‘Tony’ Gomez, the Baker Tilly Gomez accountant and partner, told Tribune Business that his assessment of Judge Kevin Carey’s ruling showed it was a “dismissal by absentia” - effectively meaning that Baha Mar should not, and cannot, appeal it.

“It is my understanding that an appeal by Baha Mar would therefore not be appropriate,” Mr Gomez explained. “Based on my experience, that [judgment] cannot be appealed.”

While cautioning that he was not an attorney, Mr Gomez has plenty of recent experience in dealing with US Chapter 11 procedures as the liquidator for CLICO (Bahamas), where he had first preserve, then sell, the insolvent insurer’s US real estate assets.

The Baker Tilly Gomez partner said judicial “comity” appeared to have been a key factor in the decision to grant the Chinese motions to dismiss Baha Mar’s Chapter 11 filings, as Judge Carey delivered fulsome praise of the Bahamian legal system.

‘Comity’ refers to the recognition one nation grants to the governmental and judicial acts of another country, while taking into account the rights of its own citizens and international duties.

Judge Carey acknowledged that while ‘abstention’ was “an extraordinary remedy” for him to apply, it was justified by the ongoing Bahamian Supreme Court proceedings before Justice Ian Winder and the appointment of joint provisional liquidators for Baha Mar.

“Here, considerations of comity support abstention,” Judge Carey found, effectively deciding to make his ruling non-appealable by Baha Mar.

“The proceedings that have occurred to-date in the Bahamian Supreme Court demonstrate that the debtors [Baha Mar] are being treated fairly and impartially.

“Although there are clear differences between the Bahamian insolvency proceedings and the US Chapter 11 process, there has been no evidence that the Bahamian laws contravene the public policy of the United States.”

For that reason, Judge Carey dismissed the Chapter 11 cases involving Baha Mar’s 14 Bahamian-domiciled companies, finding that ‘abstention’ was “in the best interests of the debtors and all the creditors”.

The only concession to Baha Mar was Judge Carey’s decision to allow the Chapter 11 case to continue for Northshore Mainland Services, the only Baha Mar company domiciled in the US.

He suggested that Northshore, which handles Baha Mar’s US call centre operations, “could serve as a useful vehicle for the parties as part of an overall resolution of the corporate family’s difficulties, in concert with the proceedings in the Bahamas”.

Whether that happens remains to be seen, and Mr Gomez said of the ‘abstention’ decision: “In reading between the lines, it appears that the judge’s decision is by reason of comity.

“It looks like he is effectively saying: ‘I am respecting my fellow ‘judge in the Bahamas’. He is also saying to all the parties: ‘Look guys, this project is 97 per cent complete. You have reached a stalemate. Please help yourselves by getting to the table and resolve this matter. You do not need the courts for this’.”

Mr Gomez reiterated that “time is of the essence” for all parties - Baha Mar and Sarkis Izmirlian; China Construction America (CCA); the China Export-Import Bank; and the Government - to reach a commercial settlement for restarting the project before the November 2 court date to hear the winding-up petition.

While expressing understanding for Baha Mar’s decision to seek Chapter 11 protection, Mr Gomez said the strategy was ultimately undermined by the jurisdictional issues created by the fact that the 14 companies were domiciled in the Bahamas.

“ I am not totally surprised by the judge’s ruling,” he told Tribune Business. “The strategy by Baha Mar was a good one but, in the end, the decision by both courts seem reasonable and very balanced.”

Baha Mar’s assets and centre of operations was also located in the Bahamas, and Mr Gomez added: “It’s clear that had they gone on with the Chapter 11, it would have been a protracted legal battle.

“The provisional liquidators have now got to invite them all to sit down at the table and negotiate.”

Mr Gomez said a negotiated settlement was in the best interests of the four parties to the dispute over the $3.5 billion project, as any other method would result in losses for all - and the wider national Bahamian interest.

He added that the November 2 deadline imposed by the court for a negotiated settlement was “probably sufficient time” to agree one.

“Let’s get to that negotiation and let’s resolve this issue,” Mr Gomez said.