Compiled by Sandra CA Ferguson
Points to Ponder
This series seeks to create awareness among we the people of the award of the International Centre for the Settlement of Investment Disputes (ICISD) in favour of the Claimants, Grenada Private Power and WRB Enterprises Inc. – which own the controlling interests in Grenlec – in their dispute with the Government of Grenada over the change in the regulatory and legislative environment triggered by the 2016 Electricity Supply Act and the 2016 Public Utilities Regulatory Commission Act.
The Acts were passed in May 2016 and came into force on 1 August 2016.
- Part 1 presented a summary re the claim by GPP/WRB, the Claimants in this dispute; the counterclaim of the Respondent, the Government of Grenada and the Tribunal’s award.
- Part 2 highlighted some of the arguments put forward by the Government in support of its counterclaim and the Tribunal’s observations and conclusions re the Government’s arguments.
- Part 3 highlighted the issue of wilful malfeasance on the part of Grenlec – the justification put forward by the Respondent/Government for its intervention, via 2016 legislation, to put an end to Grenlec’s monopoly licence.
- Part 4 presented the timelines in respect of Grenlec and the electricity sector over the period 1960 when Grenlec was established by the Colonial Development Corporation, to March 2020 when the Arbitration Award was issued.
- Part 5 will conclude the series by offering some points to ponder based on the information obtained from the Award document and other sources.
1. Second Request for ICISD Arbitration:
It is useful to note that the recent arbitration which concluded with an Award of an estimated US$67 million in favour of the Claimants, WRB Enterprises, was the SECOND request for arbitration brought by WRB, the first having brought in 1997. The 1997 Request was brought in response to the challenge of the constitutionality of Grenlec’s privatisation, brought by the NNP administration upon its election to office in June 1995. The outcome of the 1997 dispute was a negotiated Supplemental Share Purchase Agreement 1998 which confirmed the validity of the 1994 ESA plus “other related relief” and was incorporated into the ICSID 1998 Award. Indeed, the 1994 ESA, while having Parliamentary Approval, had not been proclaimed and was only brought into force following the Tribunal’s Award.
1.1. Technical Advice re Electricity Sector Reforms:
It is useful to note that the Government of Grenada received substantial technical advice, loan and grant, on the issue of electricity sector reforms, not unlike the magnitude of technical advice received by the National Democratic Congress in undertaking the privatisation effort of Grenlec back in 1994. The Technical advice on the issue of electricity sector reforms was supported by:
1.1.1. The World Bank ECERA Project:
A World Bank loan, of which US$2.8 million was approved for Grenada, supported a number of consultancies including the following:
- Electricity Sector Reforms in Grenada (Primary Laws, Advisory Memo and Licences) Consultant Janis Brennan, October 2014 – July 2015: in addition to the draft acts (ESA and PURC), the consultant also produced an Advisory Memorandum on the implications of the reforms vis-à-vis the Share Purchase Agreement 1994 and strategies to avert Arbitration.
- Rocky Mountain Institute (RMI), contracted in March 2016 to facilitate dialogue between the Government of Grenada and WRB to develop a working relationship and “a mutually satisfactory framework with major areas of alignment and a process to reach win-win solutions.
- A legal drafting consultancy, with consultant Miriam Oriolo, to modify certain legislative instruments for Grenada based on the accepted findings of the Review Consultant (Oriolo was also the review consultant). Those documents were: Electricity Supply Act No. 19 of 2016; Public Utilities Regulatory Commission Act. No. 20 of 2016; Draft Network and Draft Generation Licences for Grenlec; and Draft Terms and Conditions for the Supply of Electricity by the Licencee (Electricity Supply (Customer Service) Regulations. This assignment was targeted to be completed by December 2016.
1.1.2. Project G-RESCP (2015–2019). Reform of the Electricity Sector in Support of Grenada’s Climate Policy, commissioned by the German Ministry of Environment:
Through this project, the GIZ supported the Government of Grenada in evaluating the technical, economic and legal details of the draft law re Electricity Supply Act proposed by “the advisors to the Eastern Caribbean Energy Regulatory Authority founded in 2013.”
1.1.3. Whose Advice:
- We the people assume that those advising on the reforms would have been aware of the 1997 Arbitration Dispute which resulted in the 1998 Supplemental Share Purchase Agreement which confirmed the validity of the Share Purchase Agreement 1994 and the ESA 1994 – a CONTRACTUAL obligation confirmed by the Supplemental Share Purchase Agreement 1998.
- WHO therefore advised on the passage of the 2016 Acts which amounted to a Repurchase Event which have to be compensated in accordance with the Second Schedule Compensation of the ESA 1994, confirmed in the Supplemental Share Purchase Agreement of 1998? What was Sir Lawrence Joseph’s role in all of this? We do recall that Sir Lawrence Joseph, a member of Grenada’s legal team for the Arbitration hearing, was the Legal Advisor to Parliament during 2016, prior to becoming Attorney-General in October 2017.
1.2. Wilful Malfeasance Defence:
- On what basis and on whose advice did the GoG’s legal team introduce (belatedly according to the Tribunal) the argument of “wilful malfeasance” to support the government’s counterclaim?
- The Government of Grenada rejected any obligation to pay compensation in respect of the revocation of the exclusive licence by ESA 2016 as per the 1994 Share Purchase Agreement. The Government argued that the SPA 1994 permits the Government to intervene in the monopoly where “the Claimants have “committed extreme or wilful malfeasance in, or abandonment of, its management of Grenlec of such a nature and to such a degree as warrants” such Government action with regard to the licence.”
- The Tribunal noted as follows:
- No Evidence: The evidence put forward by the Government did not support the “wilful malfeasance” argument.
- Procedurally Inadmissible: The argument was procedurally inadmissible. In order for the defence of “wilful malfeasance” to apply, the SPA 1994 clearly requires “prior ICSID determination BEFORE not after a licence abrogation”.
- The Tribunal further noted the benefit to the Government of the provision, “This provision therefore provides the Government with an opportunity to test its allegations of wilful malfeasance risk-free before an ICSID Tribunal without triggering a Repurchase event.” However, this step was not initiated.
- Legal Fees: The legal fees should be of interest to we the people who must bear the costs:
- Legal Team/Other Experts: US$5,916,030.36/EC$15,795,801.06.
- ICSID Fees: In addition, Grenada must refund WRB 50% of the ICSID fees advanced – US$239,972.37/EC$640,726.23.
2. Four Chinese Investors and the Local Boys:
In light of the declarations of Hon. Gregory Bowen at the March 3rd PURC Consultation, and later on by the Rt. Hon. Prime Minister in Parliament, about the Chinese investors who are interested in purchasing Grenlec and the “local boys” who are worried about being “left out”, we the people need to follow the lead of the NNP administration in 1995 and ask some SERIOUS questions. Unlike the GoG, we do not have the authority to set up Commissions of Enquiry but we do have the right to DEMAND answers of those we have elected to office:
- PROCESS: What is the process and criteria by which these “Chinese” investors and “local boys” are being shortlisted and evaluated? Listening to Hon. Bowen and to the Prime Minister in Parliament, they both sounded as if the shares in Grenlec were their own little village rum shop or some bake and saltfish “hustle” on Wall Street to be given over to whomever they please to operate it!
- Oil and Gas: It is useful to also note here that one can also ask the same question of Minister Bowen’s deal with Jack Grynberg in 1996 and the award of exploration licences to the obscure Russian outfit(?), Global Petroleum Group (GPG).
- 2013 Offer to Purchase: It should be noted that in response to WRB’s offer to the Government to repurchase in 2013 at the value of EC$8.27 per share, Government offered to purchase at EC$5.49/share. WRB was prepared to accept EC$7.50 exclusively to Government but this was rejected by the Government. In the June 2014 Letter of Intent to the IMF, the Rt. Hon. Prime Minister/Minister of Finance advised that the Government’s bid was made under a contractual arrangement with an interested buyer for the shares from Government.
- Tribunal Award and (Re)purchase of Shares: The Tribunal’s award is calculated based on Second Schedule Compensation whose methodology the Government sought to reject in its arguments, describing such valuation as “exorbitant”.
- Source of Funds: Is it the intention of the GoG to finance the purchase of WRB’s shares via advances from the “four Chinese investors” and “the local boys”?
- Interested Investors: If government describes the costs as “exorbitant”, why would an investor want to purchase shares at a cost that the GoG considers “exorbitant”.
- What Else: If purchase of shares, at an “exorbitant” price, is going to be financed by 4 Chinese investors and local investors, WHAT ELSE is the GoG offering them? Is this transaction going to facilitate MORE than the purchase of Grenlec shares?
- Jobs for Grenadians: As part of its “wilful malfeasance” arguments, the GoG expressed dissatisfaction in respect of the management agreement fees that continue to be paid by Grenlec to WRB, suggesting that Grenadians were being denied top jobs in Grenlec. Does Minister Bowen have these concerns in respect of the Chinese investors that it has identified re the purchase of WRB’s controlling shares in Grenlec?
- Extractive Chinese Investment: The evidence is GLOBAL. Chinese investments are EXTRACTIVE. They DO NOT generate jobs for locals except the most menial where these jobs are generated. This is already manifesting itself here with the various projects in which the Chinese involved.
- Role of Chinese Government/Debt Trap: Any Chinese company or individual coming into Grenada to undertake significant investments in a key sector such as electricity, would be doing so with the backing of the Chinese Government. Consider what is happening globally. The Chinese government is providing loan financing through its Belt and Road Initiative for infrastructural projects such as roads, airports, ports, electricity, telecoms etc. When governments cannot afford the onerous debt servicing payments, they take control. The stories abound, particularly in Africa.
Continued in Part 5.2.
 According to the Piper Report, the NDC administration signed a Share Purchase Agreement 1994 with their “eyes wide open”
 The World Bank Eastern Caribbean Energy Regulatory Authority (ECERA) (P101414), Report No: ICR00004744
IMPLEMENTATION COMPLETION AND RESULTS REPORT, 26 June 2019
 For comparison purposes, the 2020 recurrent budget of the Ministry of Agriculture is $12,566,518 and its capital budget is $5,961,493. Other capital budgets are as follows: Ministry of Social Development et al, $17,324,475; Ministry of Education, $15,779,000 and Ministry of Health et al, $17,581,613.
 Upon its election into office in June 1995, the NNP administration set up the Piper Commission of Enquiry to investigate the sale of GRENLEC and the choice of WRB as the strategic partner.
 ICISD Tribunal Award, para. 246-257, pp.93-94
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