The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Two UK legal heavyweights have been appointed to determine Freeport’s fate in the Government’s $357m dispute with the Grand Bahama Port Authority (GBPA).

Tribune Business can reveal that the Davis administration has selected Lord Neuberger of Abbotsbury, former president of the UK Supreme Court, as its representative on the three-strong panel of arbitrators who will hear the dispute and ultimately determine whether the GBPA owes the Government for public spending in Freeport over and above tax revenues generated by the city between 2018 and 2022.

And the GBPA has chosen Dame Elizabeth Gloster, the first female judge to sit in the UK’s commercial court, as its member of the arbitration panel. With the Government and GBPA each having selected their arbitrator, the two chosen must now pick a chairman to head the arbitration panel from a shortlist drawn up and approved by both parties.

The appointments of Lord Neuberger and Dame Elizabeth indicate both sides are progressing slowly but surely towards arbitration hearings that will potentially have a profound impact on Freeport’s future governance and development, as well as ramifications for the city’s economy as well as that of the wider Bahamas, depending on the outcome.

A former Law Lord who sat on the London-based Privy Council, the highest court in the Bahamian judicial system, Lord Neuberger is also an ex-UK high court judge, Lord Justice of Appeal and Master of the Rolls before he became president of Great Britain’s Supreme Court between 2012 and 2017. Upon his retirement, his One Essex Court chambers biography reveals he has focused on practicing as an arbitrator.

Dame Elisabeth, meanwhile, became the first woman to be appointed a judge on the UK’s commercial court in 2004. She was later named to the UK’s Court of Appeal in 2013, and became vice-president of the latter’s civil division in 2016. Dame Elisabeth is now also retired and, in common with Lord Neuberger, is at One Essex Court where she practices as “a full-time international commercial arbitrator”.

An alternate member for the UK on the International Court of Arbitration, she is one of 25 persons listed as being able to serve on an alternative dispute resolution (ADR) panel to address issues that arise between the UK and Europe as a result of the former’s so-called Brexit.

UK legal involvement in the Government’s dispute with the GBPA extends beyond the arbitrators. Besides Harry Matovu KC, the UK-based barrister from Brick Court Chambers who will head the Government legal team, the GBPA is understood to have bolstered its side with Jonathan Adkin KC and Ruth Jordan, attorneys with the Serle Court law firm.

They will partner with the GBPA’s Bahamian attorneys, Fred Smith KC of Callenders & Co, and Robert Adams KC of Delaney Partners, as the arbitration proceedings move forward. However, the process is still likely some way away from actual hearings for, besides naming the arbitration panel chairman, both sides have to exchange evidence via legal “discovery” and determine what will be used in the hearings.

“The Government and Port have appointed their respective arbitrators, but the chair has not yet been selected,” one source, speaking on condition of anonymity because they were not authorised to speak publicly, told Tribune Business. “They are both kind of chugging along, getting through the process. 

“The Government is taking a very hardline position. I don’t think this is going to move quickly. There will be lots of twists and turns in this one.” Although no one approached by Tribune Business was willing to speak publicly, multiple sources confirmed the selection of Lord Neuberger and Dame Elisabeth. “It will be like going directly to the Privy Council,” one contact said.

The arbitration process could take months, if not years, and questions were again asked whether - given the “huge public interest” and issues generated by the dispute - the Government will agree to invoke the waiver in the latest Arbitration Act that allows both sides to agree private hearings should be made public.

Besides the potential impact on Freeport’s very future, and the potential fall-out for the GBPA’s 3,000-plus business licensees and residents, the very nature of the Government’s $357m payment demand raises questions involving the spending of public/ taxpayer monies and the collection of taxes in the Port area.

“Why does the Government want to keep all this secret? An important matter like this should be transparent and open to the public,” one source told this newspaper. “Why make the demand and keep all this secret? Why not let everyone know what’s going on, the licensees and everyone else?”

The PricewaterhouseCoopers (PwC) accounting firm was hired by the Government to analyse, and calculate, just how much the GBPA owes the Public Treasury for public spending in Freeport that exceeds the tax revenues generated by the city. The GBPA denies that anything is owed, alleging that Freeport contributes around $200m annually in tax revenues.

The Government is seeking reimbursement under section one, sub-clause five, of the Hawksbill Creek Agreement, Freeport’s founding treaty, which stipulates that it can demand payment from the GBPA for providing “certain activities and services” if the costs involved exceed certain tax revenue streams generated in the city. It plans to bill the GBPA for a further $75m during the current 2024-2025 fiscal year.

Prime Minister Philip Davis KC has consistently asserted that fundamental change is required for Freeport to achieve its true economic potential. He has argued that the GBPA has failed to live up to its governance and development obligations under the city’s founding treaty, the Hawksbill Creek Agreement, and that the Hayward and St George families are not up to the task required.

The original 1955 clause required the GBPA to provide rent-free office and living accommodation to government employees involved in the “the maintenance of law and order, the administration of justice, the general administration of Government, the collection of Customs Duties and other revenue and the administration of the Customs Department the administration of the Immigration Department, Post Offices” and other functions to be mutually agreed.

The GBPA was also required to “reimburse the Government annually” within 30 days of detailed accounts being presented by the latter, but only if “Customs Duties and emergency taxes received by the Government in respect of goods entered or taken out of bond at the Port Area are less than the amount” spent by the Government.

Multiple sources have questioned why the Government has waited until now - some 60 years or six decades - to try and enforce a Hawksbill Creek Agreement clause dating from the 1950s and 1960s. They argued that it smacks of the Davis administration using this as leverage to force the Haywards and St Georges, the GBPA owners, to sell and exit after they declined to accept the Government’s purchase offer.

And the Hawksbill Creek Agreement clause at the centre of the dispute 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 have to be factored into the calculation of whether the Government is spending more than it is earning in Freeport. Several sources have suggested that, rather than go to arbitration, the two sides should instead negotiate amendments to section one, sub-clause five of the Hawksbill Creek Agreement to ensure it is fit for purpose and attuned to the modern world’s realities.