The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Grand Bahama Port Authority (GBPA) was yesterday said to desire an amicable resolution of its legal disputes with two web shop chains, provided they recognise its “jurisdiction as the sole licensing authority for Freeport”.

Tribune Business can reveal that the Chances Games web shop chain has joined Playtech Systems, Island Luck’s parent, in launching separate legal challenges to the GBPA’s bid to issue gaming licences to them and levy an associated 60-fold fee increase.

Both are effectively arguing that the GBPA is trying to “usurp” the Gaming Board as the web shop industry’s regulator, and that the former has no power to issue provisional gaming licences - and charge associated fees - for their Freeport operations.

Chances Games and Island Luck are also railing against the proposed GBPA fee increases, which will rise from $3,000 and $2,500, respectively, to $150,000. Given that similar payments have already been made to the Gaming Board, they fear being subjected to ‘double taxation’ if the increases stand.

Fred Smith QC, the Callenders and Co attorney and partner, yesterday confirmed to Tribune Business that he had been retained to represent the GBPA in both matters.

He said that while the Port Authority wanted to resolve the issue without going before the Supreme Court, it needed both web shop chains to recognise it as the sole business licensing authority for Freeport.

“My clients do not see the need for a fight with either party,” Mr Smith told this newspaper.

“My clients firmly believe in doing business in Freeport, and are prepared to come to an accommodation that respects the jurisdiction of the Port Authority as the exclusive licensing authority for the conduct of business in Freeport.”

Referring specifically to the web shop gaming sector, Mr Smith added: “It will have to be determined in this action whether or not the conduct of this business requires a licence from the central government or just a licence from the Port Authority.

“This raises, again, for consideration by the Supreme Court, issues relating to the extend of the Port Authority’s regulatory jurisdiction for the conduct of business in the Freeport area.”

Central to both actions is the question of who holds regulatory authority in Freeport under the Hawksbill Creek Agreement, an issue that continues to cause tension and friction between the GBPA and central government.

It has given rise to numerous legal disputes, including whether the Utilities Regulation and Competition Authority (URCA) could levy fees on Cable Bahamas’ Freeport operations. On this, and business licensing matters, the courts have ruled in favour of the GBPA and Hawksbill Creek Agreement every single time.

The issue was a key focus for the Government’s Hawksbill Creek Review Agreement Committee, which in recommending fundamental changes to Freeport’s governance said regulatory functions currently under the GBPA’s purview should be handed back to the central government in Nassau.

Mr Smith yesterday agreed that the web shop legal actions went to the heart of who had regulatory jurisdiction, and the right to license business, in Freeport.

“My client is very much open to resolving these issues on the basis of the exercise of their jurisdiction, which exists until the year 2054,” Mr Smith reiterated.

“This will obviously have to be a matter for consideration and determination by the Supreme Court. But that’s the key here, recognising the Port Authority’s regulatory role. The key to Freeport’s economic future is recognition by the central government of the regulatory role of the Port Authority until 2054.”

That is not how the web shop industry sees it. Sebas Bastian, Island Luck’s president and chief executive, alleged in a February 11, 2016, affidavit described the proposed GBPA fee increases as “exorbitant, unreasonable, discriminatory and irrational”.

Noting that Island Luck/Playtech had paid all the necessary taxes, fees and penalties to the Gaming Board, under the Gaming Act 2014, which legalised web shop gaming, Mr Bastian said the company was also authorised to operate from three locations in Freeport.

Island Luck was initially licensed by the GBPA as an ‘Internet cafe’ operation on June 2010, and was issued a ‘Certificate of Compliance’ by the regulator in June 2014, showing it had met all fee payments and licence conditions.

Mr Bastian alleged, though, that the GBPA in early 2016 “announced the imposition of an exorbitant, unreasonable, discriminatory and irrational new schedule of business license rates” that appeared to be based on the Gaming Act and accompanying regulations.

The GBPA also allegedly threatened to cancel the business licence for Island Luck’s East Sunrise Plaza outlet with effect from February 12, 2016.

“This business license schedule is being imposed without any consultation, and without affording me and [Island Luck] any reasonable opportunity to be heard on the reasonableness and commercial practicability of the proposed business licence rates,” Mr Bastian alleged.

He added that his attorneys, Alfred Sears and Charles Mackay, had written to the GBPA on February 10, 2016, arguing that it was “usurping regulatory powers, functions and roles that are exclusively granted to the Minister of Gaming and the Gaming Board”.

The letter also argued that the GBPA was “not acting judicially, fairly and rationally”.

But Karla McIntosh, the GBPA’s in-house counsel, argued in a February 5, 2016, letter that the Hawksbill Creek Agreement and subsequent court rulings showed that all Freeport-based businesses required a Port Authority licence.

She added that Island Luck’s East Sunrise Plaza location had never been licensed by the GBPA, and said: “We are not prepared to issue any new web cafe licenses in the Port area, and it should also be pointed out that our web cafe licenses did not include any form of gaming and therefore would not cover your present operation.

“In an effort to facilitate the new industry, which has been conditionally regularised by the Gaming Board, the GBPA is now prepared to issue conditional gaming business licences for persons wishing to operate in the gaming industry within the Port area.”

Chances Games, in its application for permission to launch Judicial Review proceedings, alleged that the GBPA wanted to increase its annual license fee from $3,000 to $150,000, which it described as “unreasonable in all the circumstances”.

It added that this placed it at “a distinct economic and financial disadvantage” compared to other web shops operating outside the Port area.

While Chances Games’ action is a Judicial Review, and Island Luck’s a writ, both are largely seeking the same declarations from the Supreme Court.

These include that the GBPA is acting unlawfully in seeking to issue conditional gaming licenses, and that the true regulatory authority for Freeport is instead the Gaming Board. They also want the Supreme Court to declare that the GBPA cannot levy its proposed licensing fees.

The legal disputes over web shop licensing in Freeport, and associated fees, have arisen at an especially delicate time for the GBPA, given the ongoing Hawksbill Creek Agreement review and the Government’s posture towards it.

The Christie administration is using Freeport’s expiring ‘tax breaks’, and claims that the GBPA has failed to meet obligations such as covering the Government’s annual deficit in Freeport, as leverage to compel the Hayward and St George families to exit.

The Hawksbill Creek Agreement Review Committee has recommended that the ‘tax breaks’ be renewed for 20 years in return for the GBPA owners agreed to sell within one year of the renewal.

Some have suggested that the web shop fees are a ‘revenue grab’, while others have claimed it might be an effort by the GBPA’s owners to ‘push back’ against what they perceive as overly-aggressive pressure from the Christie administration to exit.

Tribune Business understands that Island Luck was, for the moment, holding back from pursuing its legal action after the GBPA indicated it wanted to engage in discussions to settle the matter.