The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A prominent QC has promised to this week launch a legal action challenging Freeport’s new investment regime, describing the city’s business climate as “a lose-lose proposition for all concerned”.

Fred Smith QC, the Callenders & Co attorney and partner, told Tribune Business he planned to challenge “the unconstitutional deprivation” of Grand Bahama Port Authority (GBPA) licensees’ “vested rights” through the Grand Bahama (Port Area) Investment Incentives Act 2016.

And he reiterated that the legislation, which now requires the 3,500 GBPA licensees to apply to the Government for renewal of their real property tax, income tax and capital gains tax exemptions, had also imposed a “discriminatory regime” on Freeport.

Mr Smith spoke out after the Government released documents confirming that, via the new Act, it will seek to impose financial penalties on Freeport-based businesses who fail to live up to the commitments they make in return for receiving the renewed tax breaks.

Promotional literature from the Office of the Prime Minister, praising the new Act, states: “Licensees who fail to meet obligations can have concessions revoked, or will be made to pay the value.”

This warning, which was placed under the heading of ‘accountability’, appears to confirm GBPA licensees’ worst fears, namely that the Government could demand that they pay retroactive, or ‘back’ taxes, if they fail to maintain existing employment levels at their companies for five years.

In effect, when the Act is analysed together with the accompanying regulations and incentive application form, the Government is tying the granting of investment incentives to the preservation of all existing jobs.

Mr Smith told Tribune Business that this represented an unwarranted intrusion into how the private sector works, adding that it would cause “untold confusion” in the employer/employee relationship.

“I consider that to be highly oppressive and discriminatory against the licensees of Freeport and the Hawksbill Creek Agreement regime,” Mr Smith said of the tax breaks revocation/’clawback’ threat.

“I don’t believe we’ve seen any Heads of Agreement where the Government has given far more concessions to developers outside Freeport than in Freeport, and with that kind of incentives clawback.”

The veteran QC again pointed to the Hawksbill Creek Agreement’s own anti-discrimination provisions contained in section 26 (2), which stipulates that Freeport be treated no less favourably than anywhere else in the Bahamas for investment purposes.

Suggesting that this was now being violated by the Grand Bahama (Port Area) Investment Incentives Act, Mr Smith said: “The Hawksbill Creek Agreement provides that we are not to be discriminated against as licensees.”

Taking on the retroactive ‘tax break’ clawback, and tying it to maintaining employment levels, Mr Smith added that this concept was totally alien and contrary to the way private sectors work in capitalist societies.

“It is also a very superficial and artificial perception of how business is run,” he told Tribune Business. “It’s impossible to impose conditions such as guaranteed employment, etc, which in effect is an interference with the employer-employee contractual relationship.

“It will cause untold confusion in the business relationship between licensees and business employers.”

While acknowledging the Government’s desire to incentivise growth in Freeport’s moribund economy, Mr Smith asked: “Why should Freeport be treated any differently from the rest of the Bahamas when the Hawksbill Creek Agreement says it should not be discriminated against?

“Why is it thought appropriate that these new conditions be imposed on thousands of licensees that have been able to eke out, and survive, the most oppressive and repressive economic environment in the Bahamas?

“Freeport gets the short end of the stick in terms of having multiple layers of bureaucracy and red tape, instead of being the ‘one stop shop’ it was intended to be under the Hawksbill Creek Agreement.”

Mr Smith said the Grand Bahama (Port Area) Investment Incentives Act was merely the latest example of what appeared to be a competition between successive FNM and PLP regimes to see who could best undermine the Hawksbill Creek Agreement, and Freeport’s investment and governance regimes.

As evidence, he pointed to the regular Customs Department “invention of new mechanisms” to extract more taxes from the Port area, most of which had been defeated at the Supreme Court.

Turning to the latest imposition in the form of the Grand Bahama (Port Area) Investment Incentives Act, Mr Smith confirmed: “I can also say that, as a licensee, I will be launching litigation this week challenging this unconstitutional deprivation of our vested property rights as a licensee, and also the discriminatory regime and treatment imposed by the Act.

“It appears that, for decades now, each administration competes, as between the PLP and FNM, to see who can create the most obstacles for business in Freeport, and who can best deconstruct the Hawksbill Creek Agreement.”

Describing the consequences, Mr Smith told Tribune Business: “The reality is that the business environment has continued to go from bad to worse, and the claim by Dr Darville [minister for Grand Bahama] that there has been an upsurge in the Freeport economy is, with respect, completely imaginary. People are suffering.”

With the jobless numbers further increased by both the Memories pull-out, and closure of most of the Grand Lucayan resort, Mr Smith said Prime Minister Perry Christie and his ministers were continually making “promises and holding out hope” while simultaneously undermining Freeport’s business climate.

“At the same time they are creating obstacles for what little business can be conducted by licensees,” he told Tribune Business. “Business in Freeport is a lose-lose proposition for all concerned.”