The Tribune

Richard Coulson urges all parties in the dispute to make good use of the breathing space between court hearings

THE fiasco at last Friday’s court hearing about the future of Baha Mar resulted from an unbelievable gaffe by government.

Attorney General Allyson Gibson had already revealed the government’s partiality to the Chinese when her cloying, effusive July 17 letter to the senior officers of the Chinese State Construction Company was disclosed, expressing our “sincere thanks” and “profound gratitude” for their help during her first, useless, trip to Beijing.

The events at the July 31 hearing showed that government was not only biased, but also legally incompetent.

On July 16, the Prime Minister had announced a petition to the Supreme Court for a winding up of Baha Mar as “unable to pay its debts when due” and appointing three partners of PriceWaterhouseCoopers (PWC) as the provisional liquidators. This petition was to be heard, and hopefully approved, at Friday’s hearing.

Instead, Peter Knox, the QC brought in from London as lead counsel to present the petition, simply stated, with obvious embarrassment, that it would be “inappropriate” to proceed. Justice Winder had no option but to adjourn the hearing until August 19.

Some time on Thursday, one day before the hearing, the PWC partners suddenly discovered they had a conflict of interest and would have to withdraw. And this was not a minor conflict - they had actually been advising the Chinese contractor! Somehow, with all the resources of the Prime Minister’s office available, plus the Attorney General and her lap-dog Minister of State, Damien Gomez, clearly the ball was dropped on performing basic due diligence to catch this fatal flaw in the government’s case.

Naturally, the Attorney General issued an immediate face-saving press release, making no mention of the PWC blunder, but assuring the intention to provide impartial procedures. Government told us that new liquidators had suddenly been found, three partners of accountants Ernst & Young, apparently standing in the wings just waiting to be called.

Attorney Maurice Glinton, representing Baha Mar at the hearing, had plenty to say about these shambolic proceedings. Finding the government’s petition fatally flawed, he angrily called it “abusive, oppressive” and will doubtless argue vigorously at the August 19 adjournment that it be rejected.

However, Justice Winder last week refused Baha Mar’s petition to give local effect to the Delaware Chapter 11 proceedings, and this week gave his reasons. Leave to appeal this ruling was granted, but that would be a long and tortuous path that is probably impractical. Chapter 11 must be accepted as locally dead.

So where do matters stand now? Two scenarios face Baha Mar in the welcome breathing space before August 19.

The best would be a negotiated resolution of all issues between the Baha Mar and the Chinese parties (Ex-Im Bank and the contractor CSCEC), with government encouragement and approval. Both the Prime Minister and the Attorney General have often said publicly that this is their favoured outcome. They can now help attain this objective, by refraining from the past habit of showing favoritism to the Chinese.

The second best would be the formal arbitration procedure that has been offered by the Chamber of Commerce. This would be something like a Chapter 11 proceeding, where a selected arbitrator (or panel) would review competing claims and render an equitable decision, probably giving no party (including creditors) 100 per cent of its demands. Of course, the arbitral appointment would require the approval of the three major claimants, and assurance that government would not impose procedural blocks.

By far the worst scenario would be a court decision granting corporate winding up, to be handled by the liquidators already named by government. The only winding up procedure known in the Bahamas is immediate liquidation requiring shutting down the business, firing staff and selling assets to pay creditors – just the opposite of what is needed to continue Baha Mar as a going concern that can contribute to our economy. Possibly the court could devise an unusual ruling that would keep Baha Mar in operation, but the three Ernst & Young partners, although experienced accountants, are innocent of any ability to manage a complex business enterprise like Baha Mar.

I hope Messrs Glinton and Sweeting will be successful in convincing the court that the government winding-up petition is unworkable. As I and others have already written, until our legislature enacts something similar to Chapter 11, we are legally paralysed in handling complex financial difficulties that occur in the modern world.

Whatever scenario comes to pass, I trust it will not be affected by the poisonous invective being spewed against Sarkis Izmirlian by Foreign Affairs Minister Fred Mitchell. In his extraordinary outburst before the United Nations General Assembly, he equated Mr Izmirlian’s dispute on a business matter to an act of treasonable sedition, which he reinforced in his recent Emancipation Day speech when he indicted virtually all white non-Bahamians working or resident here as racist oppressors. Of course his Fox Hill constituents will be hurt rather than helped by this diatribe, well designed to drive away foreign investment.

Our Prime Minister is a sensible man, sometimes misguided but always bereft of personal vindictiveness, who is doubtless seething at Fred’s oratory. It is too bad that we lack the tradition of Cabinet unity that in the United States or the United Kingdom would result in a “loose cannon” like Fred being immediately sacked from his ministerial office. I feel confident that Perry Christie will approach Baha Mar’s vexatious difficulties in a spirit of rational conciliation, intending to “bind up the nation’s wounds”, in the words of Abraham Lincoln, rather than open them further.

• Richard Coulson is a retired lawyer and investment banker resident in the Bahamas. He is a financial consultant and author of A Corkscrew Life - adventures of a travelling financier.