A Multi Billion Rupee Disaster

Editorial

The Betamax case involving a breach of contract by the government has now been finally determined. For recall, the Singapore International Arbitration Centre (SIAC), which was in charge of deciding the case between Betamax and the State Trading Corporation (STC), gave its decision on 5 June 2017 in favour of Betamax. This was subsequently set aside by the Supreme Court. Yesterday the Privy Council allowed Betamax’s appeal and enforced the Award. Accordingly, the STC will have to pay damages amounting to between $115-125 million (Rs 5 – Rs 6 billion) plus interest to Betamax for unjustified breach of contract.

It is well known that one of the first dossiers the Alliance Lepep-led government issuing from the general election of December 2014 took up after assuming power was the contract given out to Betamax by the STC under the preceding government in 2009. It tried at first to negotiate Betamax out of the country’s petroleum transportation contract in January 2015, on the ground that the contract had been awarded unlawfully, arguing that there had been a “colourable device” consisting of amending public procurement laws and singling Betamax out for privileged contract allocation.

To no effect, since, as advised to the government by the State Law Office previously, the contract had been made fully compliant with the changed legal dispositions and was seemingly cast in iron. Given this, Betamax which had arranged to transport our petroleum requirements in association with a Singapore company, knew that it stood on the right side of the law.

That this was actually the case was affirmed by the Office of the Director of Public Prosecutions (ODPP), later in November 2016. The ODPP decided not to prosecute several persons including the former Prime Minister; former Minister of Public Infrastructure, Transport & Shipping; the director of Betamax and certain public officials for alleged offences of bribery of public official, forgery, conspiracy and related offences under the Prevention of Corruption Act and the Public Procurement Act, as asked for by the police in December 2015 explaining that it found no evidence that the law, as it now stood, had been breached.

While it was argued at that time that the previous government would have facilitated the deal by, for example, amending the Public Procurement Act and the Public Procurement Rules, all the tender procedures had already been amended before the petroleum transportation contract had been allocated by the STC to Betamax. It could therefore not be advanced that the contract had been allocated contrary to prevailing legal provisions.

However, the Lepep government was adamant that the law had been breached and “colourable devices” resorted to in order to allocate the contract to Betamax. Not being able to negotiate the company out of the contract, it decided by end-January 2015, rashly and unilaterally, to rescind the Betamax contract despite having been advised by the State Law Office (SLO) previously that it would be out of order to do so.

The fact now is that the Lepep government acted in breach of law by rescinding the contract, for which the State – the ‘Lepep’ himself — is now called upon to pay enormous damages. This means that those frontline ministers who insisted in early 2015 they were right to rescind the Betamax contract unilaterally, have landed the country in this bad plight – with the consequences that we see today.

What defies comprehension is the adamant attitude taken by the Lepep government in the face of what its spokespersons qualified as a “contract cast in iron” when referring to the STC-Betamax contract but nonetheless decided to unilaterally rescind it despite contrary advice from the State Law Office. That qualification – “contrat en béton” — was also employed by the former PM and later Minister Mentor since January 2015 regarding the same contract, but also with reference to the CEB-Independent Power Producers’ contracts for the supply of sugar industry-generated electricity. In the latter case, no such action was envisaged to rescind what are considered by informed parties, including the CEB and the supervising Ministry, to favour the IPPs at the expense of the CEB and consumers.

This was a disaster waiting to happen. Others of the same nature might happen in time to come for the same reason – rash political decisions taken to settle scores with political adversaries while undermining the good working of public institutions. And at what cost!

* Published in print edition on 15 June 2021