The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Prime Minister’s ambition of making an imminent announcement on Freeport’s future was yesterday “derailed” by the Supreme Court, which found the Government’s consultation process was “fundamentally flawed” and needed to be continued.

Justice Indra Charles yesterday ruled in favour of the Judicial Review action brought by two Callenders & Co attorneys, finding that the stakeholder consultation over proposed reforms to the Hawksbill Creek Agreement was “procedurally unfair” because the Government withheld key information from the public.

That ‘information’ was the report by international consultants, McKinsey & Co, which attorneys Fred Smith QC and Carey Leonard argued had left themselves - and other Grand Bahama Port Authority (GBPA) licensees - unable to provide meaningful feedback on the Government’s proposals.

Despite the Government itself admitting that the McKinsey report was a major influence on its Freeport thinking, and the ‘terms of reference’ for its Hawksbill Creek Agreement Review Committee, Justice Charles noted that it was only made publicly available “at the 11th hour” - the night before the Supreme Court was due to hear the Judicial Review.

The Committee’s consultation process with GBPA licensees, investors and other Freeport stakeholders had long since concluded, with its final report and recommendations already handed to Prime Minister Perry Christie.

As a result, Justice Charles found in her written ruling: “I conclude that, without the benefit of the McKinsey report, the consultation process was fundamentally flawed.”

Funding that the Committee’s efforts did not amount to “proper and meaningful consultation”, Justice Charles “quashed” any Government decisions based on its report and recommendations.

And she ordered the Government, and the Committee, to “continue with the consultation process” for at least another month, while making the McKinsey report available to all interested parties so that they can assess its contents.

In practical terms, the effect of Justice Charles’ ruling will likely be to merely delay the inevitable, given that it is not a total bar to the Government and Hawksbill Creek Agreement Review Committee eventually moving forward with their objectives.

However, it does temporarily block the Christie administration from acting on any of the recommendations proposed by the Committee - a course of action that the Prime Minister had initially planned to unveil this week.

While this was delayed because of his trip to an energy summit in Washington D. C., yesterday’s verdict is something of an embarrassment for Mr Christie, given that he publicly stated - as recently as Monday - that his major Freeport policy initiative was set to be announced imminently.

And Mr Christie and his administration are likely to be especially annoyed that the Callenders & Co duo were supported in their action by the GBPA and its two owners, the Hayward and St George families.

One Freeport-based source, speaking to Tribune Business on condition of anonymity, suggested that yesterday’s verdict was likely to harden the Government’s attitude towards the GBPA’s two shareholder families.

“It’s big news, but I don’t know if it’s good for Freeport,” the source said of yesterday’s verdict. “All it’s going to do is that the Government is going to be totally p*.”

Mr Christie on Monday disclosed that he was not seeking to “coerce” or force the Hayward and St George families to exit, but the source suggested that this may now change, with the pressure on the two families likely to be ramped up by the Government.

They pointed out that the Government had significant leverage, especially since the three-month extension to Freeport’s expiring real property tax, income (Business Licence) and capital gains tax exemptions expired on Wednesday this week.

The Christie administration has yet to indicate whether it will provide a further extension to these exemptions until it finalises its approach to these and other, longer-term issues surrounding Freeport’s future.

The source suggested it may now move to impose real property taxes, given that the GBPA owners would be hardest hit via their 50 per cent equity interest in the Grand Bahama Development Company (DEVCO).

And it may also intensify the pressure over the millions of dollars it claims the GBPA has failed to reimburse it for the consistent fiscal deficits it has run in Freeport - something the latter is obligated to do under the Hawksbill Creek Agreement.

“The Prime Minister is going to be mad,” the source added. “They [the GBPA owners] knew he wanted to make his statement yesterday, although it was pushed back to next week. Now, they have denied him.

“They have derailed the Prime Minister. That’s a mistake. The families don’t know what they’re doing; that’s the problem.

“What do they think another 30 days of consultation is going to prove? With the greatest respect to Fred, the Government is the final arbiter. They have all the cards.”

The source said the Prime Minister had been the greatest defender of the two GBPA owners, being reluctant to force them out, which is what many in his administration want to see happen.

Suggesting that Mr Christie’s resistance may weaken as a result of yesterday’s verdict, they added: “Only the Prime Minister is fighting that off and giving them [the families] a chance. Everyone else said don’t do that. They’ve now sucked all the goodwill out of him.”

The Prime Minister was, even yesterday, telling ZNS News that he believed all parties - the Government, GBPA owners, Hutchison Whampoa and Mediterrranean Shipping Company - had reached agreement over the way forward for Freeport.

His government’s Committee had recommended that, in return for extending the expiring tax incentives for 20 years, a new, deep-pocketed owner for the GBPA be found within one year.

Adding further fuel to the Government’s fire will likely be the fact that the ruling was delivered by Justice Indra Charles, the same judge at the centre of the ‘Save the Bays’ e-mail controversy.

She has already aroused the ire of several Cabinet ministers, namely Jerome Fitzgerald and Fred Mitchell, not to mention numerous MPs by granting the injunction preventing them from further disclosing the environmental group’s e-mails.

In her written ruling, Justice Charles said there was legal precedent for ensuring that public consultation “be done properly” once the process is started.

And she agreed with Messrs Leonard and Smith that there was a legal question as whether the Hawksbill Creek Agreement review was “fatally flawed from its inception.”

Dr Doswell Coakley, a Committee member, alleged that the consultation involved meetings with 120 Freeport stakeholders over a two-and-a-half month period to mid-May 2015, accompanied by town meetings and a public relations campaign.

“At first blush, it appears that the Committee did a fair bit of consultative work,” Justice Charles ruled. “However, proper and meaningful consultation cannot only be measured by how many stakeholders participated, how many meetings were held and how long it lasted but, crucially, whether those who have a legitimate interest in its outcome had all the information necessary for such consultation.”

She agreed that the basis of the Callenders & Co duo’s complaint was that the Government failed to provide them with the McKinsey report, even though they had requested it several times, and it was critical to the consultation process.

Given that both Messrs Smith and Leonard were GBPA licensees, and affected by any decisions impacting Freeport’s tax exemptions and “economic and fiscal governance”, Justice Charles ruled that they had a “right to be properly consulted” and provided with all information necessary to help them provide informed feedback.

She added that “it escapes me” why the McKinsey report was not provided to the duo and other Freeport stakeholders.

Crucially, Mr Smith and Mr Leonard were backed by the GBPA and its attorney, Robert Adams, over the issue of ‘procedural unfairness’.

“He submitted that the McKinsey report was the backbone to the consultation’s exercise, and disclosure at the outset of the consultation was quintessential,” Justice Charles said.

“Mr Adams argued that although the McKinsey report was prepared by a private firm engaged to provide advice to the [Government], that did not warrant the suppression of the report from members of the public, whom were being consulted...

“The McKinsey report formed the basis of the consultation process, and was therefore crucial for a proper and meaningful consultation. In addition, there was no good reason to withhold the report from the consultees.”

Agreeing with this argument, Justice Charles added: “As Mr Adams vigorously submitted, there was no reason why the applicants [Messrs Smith and Leonard] were not provided a good time before the consultation process with the McKinsey report, which they implored on several occasions.

“In my opinion, it would have informed them so that they could have meaningfully contributed to this fundamental issue, which has substantial ramifications on their livelihoods.

“I conclude that, without the benefit of the McKinsey report, the consultation process was fundamentally flawed.”

Loren Klein, representing the Government and the Attorney General’s Office, argued that there was “no imminent threat” of any decision, which would harm the Callenders & Co duo’s interests, being made due to the tax exemptions being extended.

While Mr Klein said this would “maintain the status quo”, Justice Charles said it had no bearing on the Judicial Review application, “attractive though this may sound”.