29th November 2018 was the first hearing of my Judicial Review of the refusal of the Office of the Prime Minister (OPM) to provide a copy of the Tobago Sandals Memorandum of Understanding (MoU) which I had requested under the Freedom of Information Act (FoIA) since 27th February 2018. At that hearing, the OPM agreed to provide the MoU and pay my costs, so my lawsuit was withdrawn.
This Tobago Sandals MoU was signed on 10th October 2017 and should have been disclosed long ago, without any necessity for legal action on my part. The PM and Minister Stuart Young repeatedly told the public that these details could not be published as that would undermine these important negotiations and so on and so forth.
Nine months of delays and obfuscation verging on an abuse of process, but that is just my opinion, as the OPM was advised by eminent Senior Counsel, Deborah Peake.
When the MoU was released at a press conference the evening before, Minister Stuart Young was emphatic that the decision to publish had nothing to do with me or my litigation. One has to wonder at the quality of advice being taken by the Cabinet.
We had to endure expensive time-wasting and elaborate waffle, dripping with disdain, about ‘sophisticated investors‘ and ‘how government business really runs‘. Well this is a good time to examine the actual Tobago Sandals MoU and see how sophisticated investors really work and learn how government business really runs. This is a serious teaching moment.
There were many positive features in the MoU (embedded below) in favour of Sandals. In fact, the MoU is so protective of Sandals’ interests that one can scarcely imagine how on earth we the public will ever profit from this immense investment. This article details my concerns on the decisive provisions of the MoU –
Arrangement – The MoU is not legally binding and is an outline of the intentions of the parties, who will enter Heads of Agreement (HoA); Technical Services Agreement (TSA) to stipulate the development standards and the parties’ roles; and a Management Agreement for the operation of the Resorts. The State’s interest is via Golden Grove Buccoo Ltd, which is the new State Enterprise established for this project. These main agreements will be for 25 years with an option to renew for a further term of 15 years. Of course, we do not know the contents of those agreements, but those terms are crucial to understanding this deal. What is the Business Case? Have projections been prepared?
Investment – “…All costs of constructing and outfitting the Resorts in a ‘Ready-for-Guest’ state including the cost of the soft and grand openings shall be for the account of the Government…” (clause 8 on pg 6). Although there are specific provisions for private equity financing, it is still arranged so that the State has to repay. That means that only Public Money is to be invested and placed at risk in this project. New wave Public Private Partnership. I tell you.
Incentives and Exemptions – Sandals is to get incentives and concessions as per clause 8 on pg 4. I consider that proposal to be against the public interest. Given that we are investing all the capital, how are we to get a return on that investment, if there are further concessions/incentives granted to the hotelier? But there are not only questions as to the rationale for these incentives/exemptions. The MoU seeks to insulate Sandals from all risk.
Level-up clauses – At clause H on pg 7, if any subsequent resort development is granted better incentives/exemptions/tax benefits those shall also be extended to Sandals by the Government. So Sandals is to have the best terms for its full stay here.
Non-Discrimination – At clause C on pg 6, the Government agrees not to establish any special law, regulations, rules or policy applicable only to Sandals, its creditors, guests or employees. That seems to me to be an attempt to contract-out of the reach of the future needs of public policy or indeed the will of the legislature and entirely unacceptable.
Tax Stability – The MoU appears to innoculate Sandals from any future impact in terms of changes in taxes, concessions or other incentives. At clause D (between pages 6 & 7) the State gives an undertaking to stabilise the tax regime applicable to Sandals, which discloses two points. Firstly, the tax regime applicable to Sandals will be different to that which is applicable to other investors. If that were not under discussion, why else would it be included as a point in this compact document? Secondly, can we negate the sovereign right of Parliament to tax the nation? Can we contract-out of the Social Contract?
Transfer Pricing – Transfer-pricing is widely-used by multi-nationals to shift earnings to low-tax countries so as to deny the countries in which the actual wealth is generated. Interestingly-enough, those types of detrimental transfer-pricing arrangements are expressly facilitated in this MoU at clause B (1) at page 5 in which “…The Government acknowledges that Sandals intends to establish subsidiaries, affiliates or associate companies to hold the Management Agreement, operate the Resorts and to otherwise perform its role…”.
We need open-book accounting provisions and limits on the intra-company transactions which engender transfer-pricing. Open-book accounting is a well-accepted approach which would allow us to end the decades of secrecy on the terms and performance of the existing State-owned hotels by normalising the access to and publication of that data.
Risk-Free investment – The project designs are being prepared by Sandals architects and in the event that the project does not proceed for any reason, all those fees are to be repaid by the State. (clause 6 on pg 4) Sandals is placing no money at risk.
Employment – Despite clause B5 at pg 6 stating that Sandals shall “…employ qualified T&T nationals…” there are further provisions which allow the employer to decide on staff “…at its sole discretion, be the final determinant regarding the suitability for employment of all candidate employees…such that the standard of the brands can be attained and maintained…” (clause 10 at pg 4). The next two clauses state that the Government will expeditiously grant as many work permits as are required.
Environmental aspects – Sandals is to “…meet all locally acceptable environmental standards and requirements in all phases of the operation of the Resorts…” (clause 4 on pg 6).
Agricultural and other inputs – According to clauses 6 & 7 on pg 6, Sandals is to ‘give preference to purchasing‘ local agricultural and other inputs, subject to the proviso that these are available in adequate quantity, quality and at comparable prices.
I am also concerned that the MoU included a Confidentiality Clause as its penultimate item. Why the need to underwrite secrecy, especially since it is now published and the deal is proceeding.