Resiliation of the Betamax contract —
The Singapore International Arbitration Centre Award, if confirmed, could well be the first of a series of boomerangs returning to haunt the regime
Two days before Hon Pravind Jugnauth’s last budget speech, the Singapore International Arbitration Centre (SIAC), after studying and hearing representations made by both parties through their respected legal teams, rendered its verdict in what has become known as the Betamax affair. The State Trading Corporation (STC) was condemned to indemnify Betamax, a joint venture between the local business conglomerate headed by Veekram Bhunjun and a Singaporean sector specialist, to the tune of a massive 130m US$ plus legal costs and interests.
Most of the population, like us, holding no particular brief for the aggrieved parties, were unaware of the decision-making process leading to the resiliation of the Betamax contract, which was publicly announced as a Cabinet decision on or around 30th January 2015, i.e. barely one month after taking office. At the material time, it came as the first stern reminder to the population, the private sector conglomerates, the foreign investors and to the world at large, that the incoming government benefitting from a large majority in Parliament could very well do as it thought fit. That first manifestation of the axiom “Government is Government. Government decides!” was with time to be fleshed out in multiple other ways and domains.
Of course, Cabinet Ministers, headed by SAJ as the then Prime Minister, would not have reached such a decision without proper legal advice and adequate regard for an important commercial contract with international ramifications and whose objectives were, so far as we know, to ensure the secure and reliable transport of fuel from Mangalore oil refineries to Mauritius, avoiding world uncertainties in troubled times, difficulties, delays and any rupture in those most vital of supplies, energy and fuel. We may recall here the extremely volatile and tense situation on world market oil prices which exploded from some 55$ in 2007 to 135$ a barrel in 2008. The enormous impact and benefits of the security, predictability and stability factors can hardly be quantified.
They could not either, I suppose, in the sugar sector, when the government of Sir Seewoosagur Ramgoolam astutely negotiated the long-term benefits of secure, stable and known-in-advance sugar prices from UK and the EU, rather than the tempting quick bucks of higher but volatile world sugar prices. Short-termism, lack of foresight and lesser statesmen might have missed the boat or adopted a different approach but we all recognise in retrospect SSR’s visionary stand as the 1975 Sugar Agreement conferred to the national economy and finances a stable, secure and strong baseline that has lasted us more than 40 years.
Labour Party sympathisers can of course legitimately claim many other instances of visionary planning and foresight under the country’s extremely tenuous financial circumstances. The now massively overcrowded M1 motorway, the first national University, the free public health network of hospitals, dispensaries and associated pharmacies, the free secondary education, the Welfare State, come to mind and were all probably lambasted in their days. They might even consider that the party continued to have a major say in the Bleu-Blanc-Rouge alliances of the eighties which brought the first stages of export-driven industrialisation.
Closing this digression, the grounds for contract resiliation were spelt out at some length by the concerned Ministers, most vocally by the then Minister of Good Governance and Financial Services, Roshi Bhadain. From a press-reported statement, he summed up the government position thus: «Après un travail approfondi et après avoir obtenu un avis légal, nous avons découvert qu’il y avait maldonne ».
If anything, we gather from press reports that both SLO and an expert foreign opinion advised caution and, if government was determined to go ahead to satisfy its political objectives, the latter urged the authorities to give consideration to the existing termination clause in the contract between STC and Betamax. If the then Attorney General did convey and make available such advice, his input would have been overruled as Cabinet took and made known its considered collective stand, issuing its decision to STC for action at its end.
The latter, while acknowledging to the imperative command of a Cabinet decision, may or may not have asked for copy of the written legal advice or could even have sought its own independent expert opinion on the best way forward, if only to cover itself and the taxpaying public.
Be that as it may, the STC made clear in its defence that it felt bound to terminate the Betamax contract early in February 2015, following the decision communicated to it by government and has since been embroiled in the heavy expenditures and processes of a legal defence of its actions in the Betamax affair that ended up in the Singapore international legal setting.
In April 2016, Minister Gungah, refused in Parliament to provide any information about the issue as it was under judicial proceedings.
Le Mauricien of 7th June 2017 reports as follows: “L’Award du Singapore International Arbitration Centre en faveur du groupe Bhunjun, se situe dans un document d’au moins 125 pages, avec des passages extrêmement sévères contre les procédures adoptées par le gouvernement dans cette affaire.” 130 m US$ to which must be added all legal costs, interests and additional charges for any delays and feet-dragging in award execution, constitute unmistakably a major blow for consumers and taxpayers. Press reports have it that these interest charges have been accumulating at almost half-a-million Rs per day.
The SIAC Award, as Le Mauricien titled, was a massive “gate-crasher” on the eve of Pravind Jugnauth’s first budget as cumulative PM and Minister of Finance. It raises many questions ranging from the inherent ability of our parliamentary system to provide swing-majorities with the ease with which the Constitution and the weakly-built institutional checks and balances can be overpowered, to the relative silence of traditional Chambers and conglomerate private sector as the axe was being wielded, through more difficult but necessary questions about personal responsibilities of ministers and higher administrative echelons. Heritage City, Betamax, CT-Power, Bramer Bank, BAI, Appollo, Britam, that’s quite a handful and the list is not exhaustive.
We have to remember, as SAJ has rightly pointed out when invited to comment on the SIAC award, “…it’s obvious, if it has to be paid, it will be paid…!”. And clearly to some extent, popular disenchantment may well have something to do with the fact that we may inevitably end up paying for a decision taken at individual ministerial or state-owned enterprise levels but also for collective ministerial wisdom enshrined in a Cabinet where most of the political hierarchs are themselves renowned legal minds. What might be more worrisome is the thought that the SIAC Award, if confirmed, could well be the first of a series of boomerangs returning to haunt the regime and the population.
Upon application from Betamax as the aggrieved party, the SIAC judgement has been made executory and immediately applicable in Mauritius by the Acting Chief Justice Eddy Balancy in a ruling rendered on 7th September.
We obviously cannot comment on the STC appeal and what considered opinion our learned judges might reach, nor how long their deliberations might take. However, as laymen, and considering the accumulating interests clause of the Award, it is not unreasonable that a final determination by the Supreme Court might take place rather earlier than later. There is therefore the possibility that such a decision might take place during the electoral hustlings for the Quatre-Bornes by-election scheduled for 17th December. Either way the SC decision, the impact, if any, of the SIAC gate-crasher on that electorate would remain to be seen.
* Published in print edition on 6 October 2017