STATEMENT OF THE ATTORNEY GENERAL
ON THE HYATT ARBITRATION
DELIVERED IN THE SENATE ON TUESDAY JUNE 10, 2014.
When I assumed office as Attorney General, I inherited a virtual avalanche of legal claims totalling billions of dollars. It required careful and skilful management to avoid financial and legal disaster. Today, I wish to report on the successful resolution of yet another important commercial dispute against the State. Before I do so however, permit me to give a glimpse on the difficult work that has been going on behind the scenes to manage the legal ship of Trinidad and Tobago.
To date, the office of the Attorney General has managed billions of dollars in legal claims which the Government faced upon assuming office as a result of the exorbitant cost overruns and mismanagement of several mega projects by the former administration including the MLA tower, Government Campus Plaza and the Customs and Excise Building.
Apart from these construction mega projects, several disputes resulted in major arbitrations. These include:
THE OPV ARBITRATION (LONDON)
Contrary to the misinformation being peddled, the government did not “cancel” this contract but rather, stood its ground against the mighty British Aerospace Engineering, one of the largest weapons manufacturers in the world.
I had advised against the acceptance of the OPVs because of the deficiencies in the weapons combat capability that was in clear breach of contract. To accept these vessels with a downgraded combat facility that did not allow it to accurately reach its target on the high seas would have been disastrous. The vessels were compromised and quite rightly, rejected.
The government defended BAE’s claim and aggressively pursued a Billion dollar counter claim against BAE. I personally testified on behalf of the State and withstood grueling cross examination by BAE’s British lawyers in this matter.
Despite the predictions of a loss resulting in the payout of hundreds of millions of dollars to BAE, the Government emerged victorious and BAE paid $1.4 Billion dollars to the people of Trinidad and Tobago.
WORLD GTL ARBITRATIONS (NEW YORK)
The scandalous GTL transaction entered into under the former administration spawned not one, but TWO multi-million dollar international arbitrations. This project cost Petrotrin $2.7 billion dollars and the failed plant must now be sold as scrap metal.
On December 4, 2012 I reported on the first leg of this arbitration whereby we won the first arbitration in Toronto, Canada. The tribunal declared that WGTL was in breach of its obligations and ordered it to transfer 9,398,211 common shares of WGTL Trinidad to Petrotrin. It was also ordered to pay our legal costs in the sum of TT$14,588, 875.
On April 25th, I announced we won the second arbitration against WGTL in the London Court of International Arbitration. Our risk exposure on this claim was $1.8 billion dollars. Happily, WGTL’s claim was dismissed with costs to be paid by WGTL. An indication of the complexity of this arbitration is to be found in the legal costs awarded in favour of Petrotrin in the sum of:
US$2.576 million (TT$16, 563, 680.00) Sixteen million, five hundred and sixty three thousand, six hundred and eighty TT dollars.
GBP 763,200 (TT$8,494,416.00) Eight million, four hundred and ninety four thousand, four hundred and sixteen TT dollars.
and TTD 40,000.00. Forty thousand TT dollars.
TOTAL of TT$ 25,098,096.00 (Twenty five million, ninety eight thousand and ninety six TT dollars.
This magnitude of this fiasco was so great that during the financial years ended 2009 to 2010 a total of almost TT$2.7 billion has been reported as impairment losses by Petrotrin. This write off effectively converted profits in those years to losses.
SCARBOROUGH GENERAL HOSPITAL (SGH)
The contract price for the construction of the SGH was $140 million dollars. In the end, it cost almost $500 million dollars. Several complex construction disputes have arisen which are at various levels in the Court system. Many of these matters are still before the courts.
I have previously reported to the parliament on the legal victories we have enjoyed in these matters and today, I am pleased to report on the successful resolution of yet another multi-million dollar international arbitration under my supervision and management.
On Feb 4th 2011, Hyatt issued a request for arbitration against the Urban Development Company of Trinidad and Tobago (UDECOTT). The dispute arose out of a Hotel Management Agreement dated 27 July 2005 between UDeCOTT and Hyatt for construction and subsequent management and operation of the Hyatt hotel in Port of Spain.
Under this agreement, UDeCOTT agreed to finance and construct a First Class Hotel entirely at its own cost. The Hotel was then to be managed and operated by Hyatt in return for a fee. The remainder of the Hotel’s income after allowing for expenditure, reasonable running costs and Hyatt’s fee was to be remitted to UDECOTT as a monthly Owner’s distribution.
A key point of dispute arose from the fact that UDeCOTT assigned its leasehold interest in the land on which the Hotel was located to Port of Spain Waterfront Development Limited (“the Waterfront Company”). The Waterfront company purchased the land through a mortgage with Wells
Fargo Bank Northwest National Association and sub-leased the land to the Government of the Republic of Trinidad and Tobago.
Unfortunately and inexplicably, Udecott’s executive chairman Calder Hart negligently failed to procure the at the time of transferring the leasehold to the Waterfront Company, UDeCOTT did not procure the appropriate Non Disturbance Agreements from the Waterfront company and Wells Fargo as required under the hotel management agreement. This non-disturbance clause was an obvious requirement for an international hotel. Indeed, it was considered a mandatory requirement.
This negligent omission on the part of the Calder Hart led board at Udecott resulted in Hyatt refusing to pay Udecott any money in accordance with the terms and conditions of the hotel management agreement. This severely compromised Udecott’s cash flow and financial position for many years as hundreds of millions of dollars in anticipated income from the Hyatt never materialized.
To make matters worse, despite the fact that Hyatt had not paid Udecott any money since 2008, Hyatt triggered the arbitration clause in the agreement by issuing a Request for Arbitration on 4 February 2011. This resulted in arbitration proceedings under the Rules of the International Chamber of Commerce with Toronto, Canada being the venue for the arbitration hearing.
Three of these claims appeared to be for alleged breaches of the HMA which were not the subject of a Dispute at the time of the arbitration and I therefore instructed our legal team to challenge the jurisdiction of the tribunal to entertain these aspects of Hyatt’s claim.
These three heads of claim were for UDeCOTT’s alleged breaches of:
1 an un-particularized (presumably oral) agreement to construct an additional food and beverage outlet and retail space;
2 Sections 3.10(a)(3) and 3.10(b) of the HMA in failing to approve the annual plan and capital expenditures required to maintain the Hotel;
3 Section 8.8 (b) in failing to properly maintain and operate the parking garage associated with the Hotel
UDeCOTT filed its Answer and Counterclaim on 9 December 2011 and challenged the evidential basis for these claims which were not properly particularized. Furthermore, Hyatt did not quantify the loss it had suffered as a result of the alleged breaches. It promised to quantify the damages during the course of the arbitration. This was, of course, a dangerous, open-ended claim against us.
In the fourth head of claim, Hyatt alleged that under section 8.4 of the hotel management agreement that UDeCOTT’s assignment of its leasehold interest in the Land (of which the Hotel forms part) means that UDeCOTT is no longer the Owner under the agreement. Hyatt therefore sought a “determination as to which entity is entitled to the distribution of funds to Owner pursuant to Section 3.14 of the agreement.”
This fourth head of claim was the main battleground in the arbitration proceedings as this was the purported reason why Hyatt was withholding remittance monies. I maintained Udecott’s right of ownership and claim to the monies due and owing under the hotel management agreement. After all, the Waterfront company was a wholly owned subsidiary of the Udecott.
We denied that there was any ambiguity regarding Udecott’s entitlement to receive the remittance monies. Further it was denied that the failure to procure a Funder’s or Lessor’s Non Disturbance Agreement gave rise to any claim for damages or that the Arbitral Tribunal had jurisdiction to give a mandatory declaration for such a Non Disturbance Agreement to be provided.
UDeCOTT’s Answer submitted a forceful counterclaim for ALL sums due under the hotel management agreement on the ground that Hyatt was in breach of the agreement by refusing to pay.
Once we filed our counterclaim, Hyatt’s lawyers approached us to engage in settlement talks. I directed that we pursue these discussions to avoid yet another costly arbitration and hence suspended the arbitration.
Today, I am pleased to advise that after difficult and complex negotiations, we have achieved a settlement pursuant to which a Multi-Party Agreement was signed on 2 June 2004. Hyatt has agreed to pay UDeCOTT the sum of TTD334, 185,703.19, (inclusive of all accrued interest and legal costs) which has been outstanding since 2008.
I wish to record my thanks to the legal team which represented Udecott comprising Mr Akbar Ali of AFA law, a UK lawyer with more than 38 years’ experience of international commercial matters and Mr Alan Newman QC. They were able to prevail against a powerful legal team from the Hyatt comprising the international firm of Crowell & Moring LL of, Washington DC (with some 500 lawyers with offices in New York, California, London and Brussels) and subsequently, the international law firm of Weil Gotshal & Manges LLP of Washington DC (with 20 offices worldwide and some 1200 lawyers).