The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

THE Opposition’s leader is warning the Government it will “send the wrong message” to investors if it attempts a “hostile takeover” of the Grand Bahama Port Authority (GBPA) via arbitration demands.

Michael Pintard, also Marco City MP, told Tribune Business that the Davis administration’s words and actions are signalling “government overreach into a private enterprise” which “goes directly against the economic system” that exists in The Bahamas and much of the world.

With the Government now threatening to launch arbitration proceedings against Freeport’s quasi- governmental authority over monies the latter allegedly owes to the Public Treasury, the FNM leader urged it to clarify its objectives with regard to the GBPA - whether it is merely seeking reimbursement for costs incurred, or if it is using this as a pressure tactic to force the existing owners to exit.

And he asserted to this newspaper that a government takeover of the GBPA’s governance and regulatory powers, as well as key assets such as the Grand Bahama Development Company (DevCO), is a “non-starter” for most Freeport licensees and residents who have “little appetite” for such an outcome.

Speaking after Fred Mitchell, minister of foreign affairs, disclosed that the Government has with- drawn its previous offer to buy out the GBPA’s two shareholders, the Hayward and St George families, in favour of arbitration action, Mr Pintard said: “The move by the Government confirms the various things that the Opposition has been saying over the last several months.

“One of the first statements I made was that the Government should not litigate this issue in the public domain; that it sends the wrong signal to local and international investors and creates an environment of uncertainty. Mr Mitchell confirmed in his [ZNS] interview that was accurate.”

The PLP chairman, and minister of foreign affairs, seemed to concede that the Government’s public attacks on the GBPA and the Haywards/St Georges since last May’s Budget had not worked, as they were “not going to respond favourably” to the purchase offer, hence the move towards arbitration.

“The second thing,” added Mr Pintard, “is the Government, by taking the regulatory and governance functions, is sending the wrong message of government overreach into a private enterprise even though it knows by local and international law that kind of language, that kind of behaviour, goes directly against the economic system we have set up and we don’t want the hint of nationalisation or hostile takeover of any enterprise. It sends the wrong message.”

Mr Mitchell last week said the Government has now “withdrawn” its offer to acquire the GBPA and its affiliated assets, such as the 50 percent ownership interests in DevCO and Freeport Harbour Company, but it has yet to unveil its strategy and it is unclear whether it has totally abandoned these ambitions in favour of launching arbitration proceedings to gain a multi-million reimbursement for the Public Treasury.

While some sources suggested the Government has “capitulated”, it is more likely that the arbitration move will be used to exert pressure on the GBPA’s two shareholder families to sell and exit at a potentially lower price than otherwise might have been obtained.

Tribune Business revealed in late November 2023 that the Government planned to use its financial claims against the GBPA as leverage to squeeze the families if it was unable to achieve a smooth sale. The Davis administration had invoked sections in the Hawksbill Creek Agreement that stipulate the GBPA must reimburse it if the cost of providing public services in Freeport exceeds the city’s tax revenues.

This newspaper said then that the dispute may be put into arbitration if the two sides are unable to resolve their differences, with the Government believing that the Hayward and St George families will be unable to pay what is allegedly owed if proceedings go in their favour, thus giving it leverage to potentially force a sale on favourable terms.

The Davis administration has yet to reveal how much reimbursement it is likely to demand from the GBPA, but a website long known to be associated with Mr Mitchell yesterday said “the bill, is believed to be somewhere around $150m”. The GBPA, though, argued last June that the sums sought by the Government are “contested” and “it is yet to be satisfied” the claims are supported by credible evidence.

Mr Pintard, meanwhile, said the Government’s approach to the issue “flies in the face” of what is mandated by the Hawksbill Creek Agreement when it comes to resolving any disputes between itself and the GBPA. Freeport’s founding treaty, he added, first requires that both sides negotiate to resolve their differences and, if this “breaks down”, only then do they “pursue arbitration”.

Suggesting that any government takeover of Freeport’s regulatory and quasi-governmental powers was “a non-starter” for most GBPA licensees and residents, the FNM leader added: “From the conversations with persons in Freeport, I do not believe there is appetite for central government - but especially this particular government under Mr Davis - being in control of all the regulatory functions and assets.”

As for Mr Mitchell’s comments about the need to “to Bahamianise fully the city”, Mr Pintard said that - while the Opposition supported calls for “broad-based Bahamian ownership” of the GBPA - this ignores the fact that some of the existing shareholders are already Bahamian.

“This issue of Bahamianisation, let me be clear,” Mr Pintard added. “We believe there has to be a substantial increase in Bahamian ownership in the Port; middle class Bahamians wishing to invest, and private investors wishing to invest.

“We support the licensees as the primary group owning shares in the Port Authority. We support that. But let us not give the impression this is a fight by the Government, pitting Bahamians against foreigners when there are members of the existing shareholder group [Rupert Hayward] that are Bahamian. We support broad-based ownership.”

Mr Pintard pledged that, if elected to government, his party would initiate a more collaborative approach involving the GBPA and its owners, licensees, residents and civil society to determine how best to grow Freeport and move the city forward.

As part of this, he committed to eliminating what he described as the bureaucracy and red tape involved in the “two-step process” where investors in Freeport have to seek the go-ahead from both the Government and GBPA.

Urging the Davis administration to outline publicly whether its GBPA and Freeport objective is now merely a “balance of payments” dispute, where it wants to be reimbursed for expenses incurred over and above the tax revenues generated from the city; to increase Bahamian ownership of the Port; or to acquire the assets and regulatory powers, Mr Pintard said it appeared to be “making it up as it goes along”.

He added of Mr Mitchell: “The minister of foreign affairs has no comparative advantage to justify him having such a large voice in the affairs of Grand Bahama. It is a mystery to us that the minister of foreign affairs’ voice features so heavily in this public row.”

The move towards arbitration comes after Mr Davis told the House of Assembly in late June, as he wrapped up the 2023- 2024 Budget debate, that the Government has “begun to invoice” the GBPA for “reimbursement” of unspecified costs incurred in providing public services in Freeport over and above the tax income generated by the city.

He argued that the Government was justified in

seeking repayment under section one, sub-clause five, of the Hawksbill Creek Agreement, which stipulates that it can seek payment from the GBPA for providing “certain activities and services” if the costs involved exceed certain tax streams. At that stage, Mr Davis said none of the invoices had been paid by the GBPA.

However, the Hawksbill Creek Agreement clause referred to by the Prime Minister may not be all it seems. It was last amended in 1960, when Freeport was five years-old, the city’s development very much in its infancy, and the only revenues earned by the Public Treasury at the time from the Port area were Customs duties.

While it indeed stipulates that the Government should not spend any more in the Port area than it earns in revenues, and that any excess costs over and above the latter should be reimbursed by the GBPA, that clause has not been amended to account for either the Freeport of today or multiple taxes that have been added since then.

Thus VAT, departure taxes and a host of other revenue streams are not factored into the calculation of whether the Government is spending more than it is earning in Freeport. And the accounting firm hired by the Government, thought to be Pricewaterhouse-Coopers (PwC), has been given a remit to include all the Government’s costs in its billings, even though the clause in question only refers to covering expenses associated with police, Cus- toms and Immigration.

Thus, while all the Government’s tax and revenue streams are not covered by the Hawksbill Creek Agreement clause, the invoices are also seeking to recover expenses for public services it fails to mention such as education, social services and health.