AG requests $1.3b to settle OPV arbitrationPublished:
Sunday, October 28, 2012
DENYSE RENNE
Attorney General Anand Ramlogan has gone to Cabinet requesting $1.3 billion for a settlement with respect to the cancellation of the three offshore patrol vessels (OPVs). Meanwhile the arbitration over the OPVs is still ongoing. The Sunday Guardian was informed that on Thursday Ramlogan took a note to Cabinet seeking approval for the money and that the matter was considered.
Sources said during the Cabinet meeting, which was held on Thursday and chaired by Foreign Affairs Minister Winston Dookeran—in the absence of Prime Minister Kamla Persad-Bissessar—the matter was deferred to next week, when a decision is expected to be made.
When the matter was brought before Cabinet some ministers raised concerns about it, while others openly objected as they questioned why the payment should be approved, since the arbitration was still in progress. At least three ministers were reportedly vocal during the meeting, questioning the haste and timing of the request.
The meeting got so heated, sources said, that Dookeran walked out, saying he wanted no part of the decision to make the money available. When contacted, some Cabinet ministers confirmed the decision, but refused to go on record when questions were posed to them.
One minister said, “I am not allowed to speak on that issue, that is prejudicing the interest of the country. The process is still ongoing and such a report will prejudice the matter.” Another minister said, “Not me and that matter, nah. Ask me anything else. I have nothing to say on that issue. Leave me out of that matter.”
One irate Cabinet source questioned why the Government would want to pay $1.3 billion in arbitration fees rather than paying $1.5 billion for the three OPVs instead.
AG: Where did you hear that?
Contacted on Friday night and asked about the status of the OPV arbitration, Ramlogan said, “I don’t know.” Asked about the request to Cabinet for $1.3 billion, the AG laughed, saying, “Where did you hear that?” Saying he was in the middle of a break since the censure motion against him was in progress in Parliament, Ramlogan said he needed to return to the chamber and listen to what was taking place.
On October 17, during the budget debate, Ramlogan said he had been micromanaging the OPV issue and described the arbitration as “massive.” He had said the impact of the possible loss of this or other arbitration cases could leave T&T’s economy “reeling” and “catapult T&T downwards.”
Ramlogan’s statement on OPV arbitration
On June 15, 2012, Ramlogan issued a media release chastising statements by Opposition MP Colm Imbert. Imbert, in statements to the media, had said the Government had lost the OPV arbitration and was in fact liable to pay millions of dollars to British defence manufacturer, BAE Systems.
Ramlogan, in his release. said Imbert’s claims were “totally mischievous and completely false.
“It is, quite frankly, a reckless statement which bears absolutely no resemblance to the truth. In fact, the arbitration hearings have not yet been completed, with the parties scheduled to make their respective closing submissions to the Arbitration Tribunal later this month. Furthermore, the hearings have been in relation to liability only thus far, and the dates for the hearings on quantum are still to be finalised.
“In the circumstances, the statement of Mr Imbert that the GORTT is liable to pay money to BAE is simply ludicrous and a pathetic attempt to deflect public scrutiny away from his role in the purchase of the water taxis.
“Nevertheless, in stark contrast to the Opposition’s modus operandi in dealing with all matters of national importance, this Government shall continue to act responsibly in this matter and refrain from making any further comment at this time in relation to a legal dispute in which a decision has not yet been delivered.”
Griffith, AG travelled for talks with BAE Systems
On July 21, 2011, national security adviser Gary Griffith and Ramlogan travelled to England for arbitration talks with BAE Systems. Ramlogan and Griffith were invited by BAE Systems to have the arbitration talks with respect to the Government’s cancellation of three OPVs from the company.
In April 2007, BAE was awarded the contract to build, integrate, test and commission three OPVs for the TT Coast Guard. Construction began January, 2008. However, in September 2010, Persad-Bissessar announced that Government had decided to cancel the three OPVs ordered by the PNM administration at a cost of $1.5 billion. Notice of the cancellation was served on September 17 last year.
The Government said the decision to terminate the contract was due to persistent delays and technical deficiencies.
Brig John Sandy’s response
On October 25, 2011, then National Security Minister Brig John Sandy, responding to a question filed in the Senate by Opposition Senator Fitzgerald Hinds, said the State had spent a total of $4.7 million in legal fees to pursue a claim for $1.5 billion in damages in arbitration proceedings for the cancelled OPVs.
Sandy had said the contract for the OPVs with BAE Systems was cancelled on October 20, 2010, owing to “substantial material delays” in delivery. He said BAE, a British arms company, attempted to effect delivery of the OPVs but this was not accepted by the Government because of defects in the vessels.
As a result, BAE began arbitration proceedings at the International Court of Arbitration at the International Chamber of Commerce, Paris, France on the October 26, 2010, claiming the contract for the OPVs was still valid and the planned cancellation invalid. The Government, however, counter-claimed contractual damages totalling £145 million (TT$1.4 billion), Sandy said.
Hearings took place in London from May 7-18, 2012. Sandy disclosed that the lawyers hired by the State in relation to the matter included: Charles Russell (solicitors); Joe Smouha, QC; Alan Newman, QC; Neal Bisnath; and Ricky Diwan.
The $1.5 billion OPV contract was signed by the People’s National Movement administration in April 2007. A cancellation notice was served under the present administration on September 17, 2010.
http://guardian.co.tt/news/2012-10-28/ag-requests-13b-settle-opv%E2%80%88arbitrationTT WINS $1.4BBy Andre Bagoo Thursday, November 15 2012
ATTORNEY General Anand Ramlogan yesterday announced that the State has settled a more than two-year-old arbitration dispute with UK security and aerospace company British Aerospace (BAE) Systems, which will see BAE pay an estimated $1.4 billion settlement to this country.
Ramlogan said BAE will pay $1,382,000,000 in two installments, starting in January 2013, with another due in May 2013.
The payment is in relation to a $1.6 billion claim brought by Trinidad and Tobago against BAE, after BAE in 2010 started arbitration proceedings against the State. That arbitration came after the Prime Minister Kamla Persad-Bissessar administration cancelled a $2.2 billion contract for three ocean patrol vessels, or OPVs, entered into under the PNM on April 5, 2007.
“As a result of this settlement, what we have done now is to free up some money in the Treasury so that we can now use that money to fund some other projects that the People’s Partnership has, including the Couva Children’s Hospital and building of new police stations and the need to remedy infrastructure and build more roads,” the Attorney General said at a Cabildo Chambers press conference.
“Trinidad and Tobago has therefore emerged victorious in this dispute. This settlement is a significant victory for the people of Trinidad and Tobago,” he said.
A settlement agreement was signed in London during Divali (Tuesday) after a meeting between representatives of both the State and BAE, he said.
The settlement relates to a 2010 arbitration case which saw both parties make claims for financial compensation against each other in the wake of the PP Government’s decision to cancel the contract.
BAE Systems claimed the State owed them $611 million, while the State counter-claimed for $1.6 billion, citing apparent breaches of the contract including: late delivery of the OPVs and problems with the “combat system” in the vessels.
Arbitration proceedings began and were in train when negotiations began after a diplomatic intervention from British High Commissioner to TT Arthur Snell, Ramlogan said.
“BAE Systems in settlement of the claim filed by the Government of Trinidad and Tobago has agreed to pay the people of Trinidad and Tobago the sum of $1.382 billion in settlement of the claim brought by the Government of Trinidad and Tobago against BAE Systems,” Ramlogan said. “The Government of Trinidad and Tobago, conversely, has not agreed to pay one red cent to BAE Systems for their claim of over $600 million against the Government.”
Snell yesterday welcomed the settlement and said there was no impediment to trade between Trinidad and Tobago and Britain.
“I was always confident that this issue did not in any way mean trade relations were hindered,” he told Newsday. “Trinidad and Tobago and the UK engage in billions of TT dollars in trade on an annual basis regardless of this one contract. I think, however, that it was important that this issue was resolved.”
Snell said, “The key reason for this settlement is that BAE has sold the vessels to Brazil. You can’t sell a vessel twice. BAE is re-imbursing the Government.”
But while BAE will pay $1.4 billion in two installments, the net gain for the Treasury will actually be lower. Ramlogan noted that the PNM had entered into a $1 billion loan arrangement with BNP Paribas to fund the OPV deal. The $1.4 billion settlement is to be applied to early re- payment of this loan arrangement.
“After repayment of the outstanding balance on the loans, there will be a surplus of TT$340.09 million which can go towards the construction of our hospitals and police stations,” Ramlogan said. “This is money that could build roads.”
Additionally, Ramlogan said the State has also already expended about $20 million in legal fees for the arbitration proceedings. However, he said $78 million had been expected to be the final bill, were the arbitration to have continued into its second stage. Ramlogan said there would be other savings because of the settlement.
“Because we have paid off the loans now, we will save TT$57.149 million in interest,” he said. “After we pay off the loan, money we would have allocated for repayments, can be used for other things.”
“And let us not forget the operational costs for the three OPVs which would have been approximately TT$32 million per year,” he said. “We have saved this country a recurrent expenditure of TT$32 million per annum that would have been a yoke around the necks of our children in the years to come.”
Ramlogan, the Cabinet’s legal adviser, said he had advised in 2010 that the contract be quashed.
“After careful consideration and after receiving sound legal and technical advice, this Government cancelled the OPV contract,” he said. “We didn’t just get up one day and decide on a vaps to get out of the contract. When we came into office in 2010 there were serious problems with the OPV project. The first OPV was scheduled to be delivered in May 2009 and was therefore over one year late. The second OPV was due in February 2010 and was also overdue,” he said.
Ramlogan continued, “Apart from the delay, there was a serious problem with the combat system which didn’t conform to the contract specification. This delay, together with the continuing failure on the part of BAE to remedy the deficiency prompted the Government to serve a notice of cancellation on BAE to terminate the contract on September 16 2010.”
“The arbitration was tried in London in May 2012. Evidence was given on behalf of the State by me, Commodore Garnett Best and Captain Mark Williams.” Attorney General Anand Ramlogan yesterday gave the following statement on the $1.4 billion Trinidad and Tobago will receive in the settlement of a dispute with British defence firm BAE Systems over a contract for three ocean patrol vessels.
When the People’s Partnership was elected with an overwhelming mandate to serve the people, it signalled a desire for radical change by the people. It was a democratic expression of frustration and a resounding rejection of some of the many ill policies of the former administration.
Far too much was spent on grand projects that were not relevant to the needs and problems of our nation. In many respects, they were based on delusions of grandeur and the oversized political ego of a government that had lost touch with the people. A government which continued to ignore the growing concern about the commitments to massive financial expenditure that would encumber our children’s future.
My Government has been committed to readdress this failed policy but with this it has had to recognise its responsibilities in accordance with the law and maintain this country’s reputation in accepting its liabilities where it was right and appropriate to do so even where it would not have entered into a particular contract or project.
Cost and recurrent
expenditure
Among the many mega projects was the purchase of three offshore patrol vessels (OPV). On April 5, 2007, the former administration had signed a contract with VT Ship Building (BAE Systems) under which, BAE Systems were to design and construct three OPVs and provide training and maintenance for them. The total financial commitment at the prevailing exchange rates then for this project was TT$2.192 billion.
Once these vessels were delivered, taxpayers would have to finance a recurrent, annual expenditure of TT$32 million per annum. This represents the operational costs for all three vessels per annum. No doubt, this figure would have progressively increased for the vessels as a result of deterioration and problems associated with everyday use.
When we came into office in 2010 there were serious problems with the OPV project. The first OPV was scheduled to be delivered in May 2009 and was therefore over one year late. The second OPV was due in February 2010 and was also overdue.
Apart from the delay, there was a serious problem with the combat system which didn’t conform to the contract specification. This delay, together with the continuing failure on the part of BAE to remedy the deficiency prompted the Government to serve a notice of cancellation on BAE to terminate the contract on September 16 2010.
We were not prepared to accept these vessels in a defective condition. The risks were too many and too great. In response, BAE served a notice of arbitration on the Government, claiming damages in the sum of TT$611.032 million plus interest and costs. Trinidad and Tobago filed a counter claim in the sum of TT1.654 billion.
The Government was prepared to stand up for its rights — the rights of the people — against the one of the largest military defence companies in the world. We were ridiculed for doing this by the Opposition.
After careful consideration, and after receiving sound legal and technical advice, this Government cancelled the OPV Contract. We didn’t just get up one day and decide on a “vaps” to get out of the contract. We acted carefully because we inherited very expensive contract obligations from the PNM. How could a responsible Government ignore such advice? How could we justify to the people that we failed to act on advice, while throwing good money after bad? The Opposition themselves would have been the first to criticise us if we did so!
Rowley on OPV
Dr Keith Rowley even said that we should have been scared to challenge BAE. Imagine that! A man who wants to be the Prime Minister of this country was telling us that we should be afraid to insist that the country gets what it paid for! On the said Friday October 22, 2010, Dr Rowley championed the cause of BAE highlighting the fact that the Sultan of Brunei has recently lost a similar arbitration against BAE and were forced to pay BAE: “I will tell you, Mr Deputy Speaker, we are not the only ones who cancelled contracts at BAE... The Sultan of Brunei attempted to do the same thing on a 700 (million) contract, and if we think that BAE will give us a pass or give us a bligh, especially since the Prime Minister has made the case for BAE lawyers, I expect that if the Government continues along this path, cancels this contract, that we will, in fact be heading for the courts and we would not have many legs to stand on because we are talking about delays.”
In July 19, 2011, the Member for Diego Martin West was still confidently spewing wrong information about this matter. Let me quote from the Express dated July 19, 2011: “Tell the country what is happening with the arbitration. What are the issues that are being arbitrated and whether in fact it is correct to say that the Government in now facing an option of taking the vessels, the very vessels they determined to be lemons,” said Rowley.
And he wasn’t the only one in the Opposition who was suffering from foot-in-mouth disease. On June 15 of this year, Colm Imbert said that this Government had lost the arbitration and was liable to pay hundreds of millions of dollars to BAEs. Permit me to quote the Honourable member who, at the material time, was ironically responding to allegations about the reckless, wasted expenditure on the purchase of the MV Su: “It is my understanding that the Government has lost the OPV arbitration and the country may be liable to payout monies to BAE systems in the sum of hundreds of millions of dollars.”
The entire Opposition repeatedly predicted that we would have to pay hundreds of millions of dollars to BAE because we were wrong to cancel the contract. Listen to the member for Arouca/Maloney on June 4, 2012: “Can the Minister of Finance tell us… how much money we would have to pay in the arbitration? Can the Minister of Finance tell us that?
Because I am sure we would have saved a lot of money by maintaining the contract for the OPVs.”
In an article published in the Trinidad Guardian on Monday October 29, 2012, entitled “Rowley: Battle for Tobago begins”, it is stated as follows: “Wading into Ramlogan on the OPV issue, Rowley said the Government ‘hid’ funding in the National Security Ministry’s budget allocation to fund payments for the OPV settlement. He said he had asked the minister during the budget debate what a certain million dollar funding was for and he was told “equipment”.”
And condemnation, criticism and vilification was not confined to the other side. On October 28, 2012, in an article published in the Sunday Guardian, it was stated as follows: “Attorney General Anand Ramlogan has gone to Cabinet requesting $1.3 billion for a settlement with respect to the cancellation of the three offshore patrol vessels (OPVs). Meanwhile the arbitration over the OPVs is still ongoing. The Sunday Guardian was informed that on Thursday Ramlogan took a note to Cabinet seeking approval for the money and that the matter was considered. When the matter was brought before Cabinet some ministers raised concerns about it, while others openly objected as they questioned why the payment should be approved, since the arbitration was still in progress. At least three ministers were reportedly vocal during the meeting, questioning the haste and timing of the request.
“The meeting got so heated, sources said, that Dookeran walked out, saying he wanted no part of the decision to make the money available. When contacted, some Cabinet ministers confirmed the decision, but refused to go on record when questions were posed to them.
“One irate Cabinet source questioned why the Government would want to pay $1.3 billion in arbitration fees rather than paying $1.5 billion for the three OPVs instead.”
This article goes into extensive details of an alleged Cabinet meeting, attributing detailed statements to ministers thereby placing doubt and mistrust in the minds of the public in relation to the Government’s handling of this matter.
The truth about the
arbitration
Today I will provide the truth and the facts of this matter to the nation. It will be up to you, the citizens of this nation, to decide who should be trusted.
The arbitration was tried in London in May 2012. Evidence was given on behalf of the State by, Commodore Garnett Best, Captain Mark Williams and I.
Subsequent to the arbitration hearing, the parties, as a result of a diplomatic initiative, engaged in discussions. This afternoon, I am pleased to announce that those discussions have been fruitful. BAE Systems and this Government have reached a full and final settlement of the dispute between them in relation to the OPV contract in the sum of TT$1.382 billion. We are pleased that the dispute has been settled amicably. BAE has agreed to pay the Government of Trinidad and Tobago this sum.
And let me now say, for the benefit of the nation, and the Members opposite who were so sure how this matter would turn out: The settlement amount is TT$1.382 billion.
After repayment of the monstrous billion dollar loan which the PNM took for this project, the Government of the Republic of Trinidad and Tobago will end up with a surplus of TT$340.09 million. This is money that could build hospitals, roads. The Attorney General said the high-profile arbitration proceedings – and its outcome – sent a message to the world’s business community.
“It means that Trinidad and Tobago is serious about its business and is not a banana republic,” he said. “You cannot come and get away with murder and we are prepared to stand up.”
Ramlogan said he could not say how much money was spent by the PNM on the OPV project due to “abysmal” record-keeping.
“This was so serious that I have taken the step to have guidelines drawn up so that future contracts of this magnitude will have to follow specific procedures and guidelines,” he said. He did not give details of the nature of the records that were missing but said some expenditure would have “fallen through the cracks” such as for training of military personnel.
“My problem now is to quantify and put together this jigsaw puzzle,” he said. Ramlogan took the opportunity to throw barbs at the Opposition and criticised Rowley and Diego Martin North/East MP Colm Imbert. He said both had “foot-in-mouth” disease and had given wrong information on the OPV issue. Rowley declined requests for comment yesterday, with a spokesperson saying he was at a meeting with civil society groups.
A fiery Ramlogan took the opportunity to also say, “It says to my critics that they should think twice before opening their mouths and risking criticising me because I am very serious about social justice.” He said he will continue the $2 billion worth of claims made by the State through legal actions against various entities – such as Udecott, Clico. “I intend to vigorously pursue these matters,” he said.
The Attorney General added, “I know what I am doing and I know what my responsibilities are. I gave up a lucrative and successful private practice because I want to see a better future for Trinidad and Tobago.”
BAE Systems – a publically traded company in the UK – issued a statement to the London Stock Exchange (LSE) yesterday morning. The statement gave no details of who would pay the settlement or what amount was involved. It stated, “the three OPVs that were the subject of the Government of the Republic of Trinidad and Tobago (GORTT) contract were subsequently sold to the Brazilian Navy under a contract signed in December 2011 and the first ship was handed over to the Brazilian Navy in June this year.” It added, “The settlement with GORTT is at an amount consistent with provisions held.” A BAE spokesperson declined to elaborate on the terms of the settlement. BAE stocks fell slightly by 0.71 percent on the LSE yesterday after the statement was issued to stock-brokers.
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