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Cca Demands Arbitration For Sarkis's Claim

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

BAHA Mar's main contractor yesterday urged the New York courts to seal its terms for restarting construction, as it bids to push Sarkis Izmirlian's $2.25 billion fraud lawsuit into arbitration.

China Construction America (CCA) and its affiliates revealed in legal filings that they plan to issue a motion "to compel mediation and arbitration, and to stay" the litigation launched against them by Baha Mar's original developer on Boxing Day 2017.To support its case, CCA will produce a document referred to as 'Amendment 9', which allegedly sets out the terms it agreed with Baha Mar's financier, the China Export-Import Bank, and the latter's Perfect Luck vehicle, to restart construction work at Baha Mar and progress the project to completion.

The Chinese state-owned contractor is urging the New York State Supreme Court to seal this, and keep its contents 'confidential', on the grounds that their public release would "competitively harm" CCA.

Disclosing its strategy to counter Mr Izmirlian's allegations that it perpetrated "one of the largest construction-based frauds in this hemisphere", CCA's filings state: "Defendants are prepared to file a motion to compel mediation and arbitration and to stay this action.

"Plaintiff BML Properties Ltd [Mr Izmirlian's company] is required to mediate and arbitrate this dispute because its claims are based on, and relate to, a contract requiring the mediation and arbitration of disputes. In support of the defendants' forthcoming motion, defendants will submit one confidential document, Amendment No. 9, the disclosure of which would competitively harm defendants."

Explaining this 'harm', CCA added: "Amendment number nine, among other things, set conditions for the recommencement of CCA Bahamas' work on the project and amended the terms for completion, including terms related to price and scope.

"Amendment number nine also established new dispute resolution requirements, mandating first mediation and then arbitration of any disputes."

This was backed by an affidavit sworn by Pengfei Yu, CCA (Bahamas) commercial manager, which alleged that the agreement - for construction work worth $600-$700 million to complete Baha Mar - contained "extremely valuable and sensitive" information that would benefit the contractor's competitors.

Mr Yu, revealing that 'Amendment 9' was executed between CCA and Perfect Luck on August 30, 2016, alleged: "Amendment 9 contains competitively sensitive and confidential financial and business information, including the competitive pricing of CCA Bahamas' services and other matters relating to CCA Bahamas' processes in performing its services under the master construction contract (MCC).

"Amendment 9 contains information that is extremely sensitive and valuable to competitors of CCA Bahamas and its affiliates in the construction sector, and the disclosure of this confidential financial and business information would cause CCA Bahamas and its affiliates competitive harm."

To strengthen its case, CCA suggested that 'Amendment 9' was among the documents sealed by the Bahamian Supreme Court when it approved the transfer of Baha Mar's real estate and other assets from the Deloitte & Touche receivers to the China Export-Import Bank's Perfect Luck vehicle.

This was the first stage in Baha Mar's ultimate sale to present owner, Chow Tai Fook Enterprises (CTFE), but Mr Yu admitted in his affidavit that he did "not know for certain" whether 'Amendment 9' was one of the documents designated as confidential by Justice Ian Winder.

And CCA's legal filings also conceded that Justice Winder's rationale for 'sealing' all details of the Perfect Luck transfer was to 'preserve the integrity of the sales process, which remains a commercially live issue'. That 'process' has long since passed with the sale to CTFE.

"The court sealed information and documents because even though the matters at issue in that [Bahamas] case were important to the general public, 'it is nonetheless a commercial transaction of a largely private nature'," CCA's New York filings admitted.

"Defendants cannot represent with certainty whether 'Amendment 9' is one of the particular documents sealed by the Bahamian Supreme Court. However, 'Amendment 9' was only executed as part of the court's approval of the asset sale and transfer.

"Therefore, the Bahamian Supreme Court's decision to seal information relating to this transaction further supports the defendants' request to seal Amendment 9 in the present action."

CCA is arguing that Mr Izmirlian's lawsuit should be sent to arbitration, rather than heard by the New York court, on the basis that his BML Properties vehicle inherited obligations from Baha Mar's construction contract requiring that all disputes be dealt with in this manner.

It accused Mr Izmirlian of attempting to "circumvent unambiguous and mandatory mediation and arbitration requirements that apply to the construction contract at the heart of" his damages claim.

"Plaintiff is subject to those mediation and arbitration requirements because it alleges, among other things, that it is a third-party beneficiary of two agreements that form inseparable parts of that construction contract: a May 2013 memorandum of understanding (MOU) and signed minutes of a November 2014 meeting," CCA claimed.

"Defendants deny that plaintiff has any rights as a third-party beneficiary. But because plaintiff alleges that it is a third-party beneficiary, the doctrine of judicial estoppel binds plaintiff to that assertion, and plaintiff thus has subjected itself to the arbitration provisions, which are found in 'Amendment 9' to the construction contract. Those provisions require mediation and then arbitration under the rules of the International Chamber of Commerce (ICC) of any unresolved disputes.

"Because the construction contract dispute resolution clause mandates mediation and arbitration, defendants are prepared to file a motion to compel mediation and arbitration and to stay this action."

Mr Izmirlian's lawsuit alleges that CCA and its subsidiaries perpetrated a "massive" scheme of "cover up", "deceit", "outright sabotage" and lies to both conceal its failures and "extort more money than it earned".

The action, filed in the name of the developer's BML Properties vehicle, claims that the Chinese state-owned construction firm deliberately concealed its intention to use Baha Mar as "a massive training exercise" that ultimately doomed the project to failure.

Besides alleging that CCA's "real intent" was never to complete Baha Mar "on time and on budget", Mr Izmirlian and BML Properties also claim that it falsified and misrepresented reports on the mega resort's construction progress and the size of its workforce.

The claim, for breach of contract and fraud, alleges that the Chinese contractor earned "tens of millions, if not hundreds of millions" more than it should as a result of uncorrected defects plus inflated and "sham" billings.

And the lawsuit also details numerous alleged construction defects that, if not caught, would have compromised the health and safety of thousands of tourists, hotel guests and Baha Mar staff.

Comments

Economist 1 year, 1 month ago

The Chinese will do anything to avoid disclosure of all the corruption they are purported to have been involved in.

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John 1 year, 1 month ago

While is is not unusual for legal cases to go to both mediation an arbitration in the US, it is unusual for the defendants to request such action. This is especially strange coming from CCA since Sarkis has been virtually begging and pleading with them, and China ExIm Bank, by extension, to re-negotiate with him, even up to the time the Bah Mar property was set to open. He even, at one point, offered to buy back the Bah Mar property at a premium. And while Izmirilian's case my be both intense and extensive, he may only need prove on enough points to show that it was the actions of CCA, and by extension, China ExIm Bank that cost him to lose the Bah Mar property. CCA's request for Arbitration and Mediation may be either an attempt to stall litigation, or a discovery mechanism to see how hungry Izmirilian is and to see what it will take to cause this lawsuit to go away..

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sealice 1 year, 1 month ago

Der Chingros sound like the big orange fella running tings to the north of us.....

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SP 1 year, 1 month ago

China Construction America (CCA) its affiliates and the Chinese government at large is about to discover that they cannot swing the American judicial system as they did with the Christie-led administrations' kangaroo court in the Bahamas.

Sarkis Izmirlian had a legitimate bankruptcy case with a precedent ruled by a U.S. judge as having been the proper course of action.

This Chinese request of "sealing" these matters is laughable in the real world and will not be allowed.

Mr. Izmirlian and the Americans will also move to bring pressure to unseal the Bahamas ruling which is the only proper course of action to get to the root causes of this farce perpetrated against Izmirlian by the Chinese and the Christie administration!

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Porcupine 1 year, 1 month ago

I truly hope that Sarkis prevails. From my perspective, his presence here would have helped uplift our nation, while those who presently "own" Baha Mar couldn't give a shite about this country. We were sold out by our own elected officials, by Christie and company. Can anyone really argue this point?

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ThisIsOurs 1 year, 1 month ago

I know nothing about Sarkis as a person or his effectiveness as a businessperson, but I can examine what he did in his treatment of Bahamians. He clearly went to great effort to ensure that qualified Bahamians were a part of the project, were in senior positions involved in decision making, not merely figureheads, and that Bahamian culture was built in. That says to me that he had a genuine love for the Bahamas, he wanted to make money too but you can't do those kinds of things and not have an interest in Bahamian welfare. It's unfakeable.

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John 1 year, 1 month ago

To my recollection Perfect Luck came into the picture only after the property was already seized from Izmirlian. So what bearing does i the sealed agreement with them have on Izmirlian’s case? The Chinese wanted the Bah Mar property and I think they will make him an offer ( maybe the $900 million he put in plus change) to walk away.

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sheeprunner12 1 year, 1 month ago

Agreed .......... But he should not settle for less than $1.5 Billion ....... and come back and invest again with the new FNM government ....... maybe in Long Island.

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Porcupine 1 year, 1 month ago

Honestly. After years of reading about the way Sarkis was treated by The Bahamas, why would any thinking person want to do business here? All we can attract are pirates, and naive investors who have more than enough money, or money enough to burn.

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observer2 1 year, 1 month ago

Can anymore guess who the unnamed financial backers of Oban are?

Anyone know why the government would sign a heads of agreement with no idea where the $5 billion is coming from?

Anyone know who has $5 billion to lavish on a last certury high carbon polluting global warming environmentally unfriendly industry and build it in a basically third world country with little transparency and load of corruption everywhere?

Can anyone guess?

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jus2cents 1 year, 1 month ago

Its so obvious Baha Mar was stolen away from Izmirlian.

I hope he gets the hotel back and full retribution and compensation.

Someone should make a documentary about this whole farce.

I also hope the Bahamian government never intervene with a business deal like this ever again.

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