The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Grand Bahama Port Authority (GBPA) is asking the Supreme Court to find that the Hawksbill Creek Agreement exempts Freeport-based web shops from having to obtain a Gaming Board licence.

The quasi-governmental authority, in written submissions filed on Tuesday, argued that web shop gaming was an “entertainment” or “amusement” business, and thus fell within the Hawksbill Creek Agreement’s ‘carve out’ from government permits and licensing.

The GBPA’s submissions, filed in response to the action brought against it by Jarol Investments, which trades as Chances Games, are effectively inviting the Supreme Court to do as the web shop chain has alleged - “carve out a special place in Freeport” for web shop gaming.

Should the GBPA succeed, it would undermine the Government’s goal for a national regulatory regime for web shop gaming, which was a principal goal of the Gaming Act 2014.

Given these potential implications, Tribune Business sources have expressed surprise that both the Gaming Board and Attorney General are yet to file legal papers and intervene in the legal battle.

The GBPA is arguing that Jarol Investments’ “real complaint” is not its ability to licence Chances, but the increased fees it is seeking to levy.

The web shop has blasted the proposed 500 per cent fee increase as “vastly and disproportionately in excess” of what it paid previously, but the GBPA is arguing that there is nothing in the Hawksbill Creek Agreement that limits what it can charge.

It added that the proposed fees were “in line” with what it charged casinos, and less than those levied by the Gaming Board, which showed the charges were “not irrational and unfair”.

As a result, the GBPA is alleging that Jarol/Chances is raising “straw man” arguments to obscure the real issue at dispute, and focusing on points that are either “irrelevant” or “moot”.

Jarol’s case against the GBPA, set to be heard today, is seeking to finally determine who the gaming industry regulator for Freeport is - the Gaming Board in Nassau, or the Port Authority.

The GBPA acknowledged that the “central question” was whether the Gaming Act 2014 applied to the Port area and its licensees, with its analysis suggesting it did not.

The Port and its attorneys, Callenders & Co, argued that the business activities of web shop operators fell within clause 2 (23) (a) of the Hawksbill Creek Agreement, coming under the definition of “places of entertainment [or] amusement”.

This, it argued, is because “the primary purpose of a web shop” is the provision of gambling games.

Jarol/Chances, though, is arguing that its business instead falls under the Hawksbill Creek Agreement’s clause 2 (23) (b), which requires that business activities subject to national laws and regulations first obtain the relevant permits from the Government - in this case, the Gaming Board.

As a result, the web shop operator alleged it “would be quite a stretch” to interpret the Hawksbill Creek Agreement as the GBPA is doing on relation to its gaming business.

However, the GBPA is arguing that Jarol’s reliance on the Gaming Act’s definition of ‘gaming’ is “irrelevant”,as there was nothing in it that “sheds any light” on how the Hawksbill Creek Agreement’s interpretation of ‘entertainment’ and ‘amusement’.

“For all these reasons, the business of offering gaming as carried out by the plaintiff falls within clause 2(23)(a) of the Hawksbill Creek Agreement,” the GBPA argued.

“Accordingly, no Port Authority licensee is required to obtain any license from the Government or any Governmental agency (such as the Gaming Board) in order to carry out such a business.”

As previously reported by Tribune Business, the issue of who has regulatory responsibility in Freeport - the GBPA or a national regulator created by statutory legislation- has generated frequent conflicts and court battles in recent years.

This has particularly reared its head in the context of the Utilities Regulation and Competition Authority (URCA), and whether it - not the GBPA - should be the licensing and regulatory authority for utilities in Freeport.

Cable Bahamas has successfully challenged the ability of URCA to levy Internet fees on its subsidiary, Cable Freeport, while the Grand Bahama Power Company (GBPC) is currently contesting the regulator’s ability to oversee it.

Some observers are likely to view Freeport’s founding agreement, the Hawksbill Creek Agreement, as outdated and inconsistent with global trends favouring the creation of national regulators.

The Jarol Investments case will especially irk the Christie administration, given that a key element of its recent Memorandum of Understanding (MoU) with the GBPA was designed to address the issue of regulatory conflicts in Freeport.

The MoU’s clause 1.18 commits the GBPA to ensuring its regulatory and quasi-governmental powers are ‘harmonised’ with national laws and government policies/regulations.

And the ‘harmonisation’ is supposed to occur via “existing independent regulators” such as the Utilities Regulation and Competition Authority (URCA) and the Gaming Board.

The GBPA, meanwhile, argued that Jarol’s summons “fails to address the real issues in the case”, and focused largely “on matters which have never been in dispute, and are now moot”.

Of the five issues raised in the web shop operator’s originating summons, the Port said three should be struck out because they were “not in dispute”, while another issue had “no foundation at all”.

The GBPA also alleged that there appeared to “fundamental confusion” in Jarol’s legal filings over the nature of the licences it issued.

The web shop operator frequently refers to ‘Business Licences’ and ‘Gaming Licences’, but the Port argued that it only issued ‘Port Authority licences’ that were not intended as a substitute for permits from Nassau.

And the GBPA said it was untrue for Jarol to say it had not withdrawn a January 25, 2016, claim that the Gaming Act provided the basis for its licensing authority and fee increase. The Port said an August 31, 2016, letter from its attorneys had clarified this matter.

“Jarol now persists in the narrow point that the Port Authority has no powers conferred upon it by the Gaming Act. This is not in dispute – and never has been,” the GBPA alleged.

“Jarol has nonetheless persisted with pursuing this point, in the hope, it seems, of trying to persuade the Court to prevent the Port Authority from exercising its existing rights under the Hawksbill Creek Agreement, and/or to give Jarol preferential treatment in its ordinary licensing arrangements with the Port Authority.”

The GBPA argued that it had only been seeking to place the license with Jarol “on a proper footing”, because it was “carrying out activities in the Port area for which it is not properly licensed”.

Although licensed since 2005, the company had only been permitted to act as an Internet cafe, not as a gaming ‘web shop’.

“The businesses which Jarol was licensed to carry out did not, therefore, include the operation of gaming ‘web shops’,” the GBPA alleged.

“Indeed, prior to the 2014 Gaming Act, the operation of such web shops was unlawful (or at least, its lawfulness was open to question), so that the Port Authority would not - and could not - have licensed Jarol to carry out such unlawful activities.”

While acknowledging that the Hawksbill Creek Agreement did “not explicitly state” that the GBPA has the power to grant licenses, the Port and its attorneys argued that this was “woven” into the agreement by numerous references to licensees.

With no limits imposed on the fees it can charge, the GBPA pointed to its fee schedule, which levies a maximum of $300,000 or 1 per cent of winnings - whichever is greater - on Freeport-based casinos.

“The fees proposed to be charged for conducting a web shop business are in line with the existing fees charged for other gaming activities such as casinos,” the GBPA alleged.

“They are also less than the fees charged by the Gaming Board. The fees are not, therefore, irrational or unfair.

“Jarol has not set out any proper basis for the court to interfere with the level of fees proposed to be charged by the Port Authority to its licensees, and even if the court were minded to interfere, the level of fees is not so unreasonable or irrational that the level should be reviewed.

“Nor is the court in any position to determine what a reasonable fee might be – Jarol has led no evidence on the point, but simply asserts that it should not have to pay any fee at all.”