Don't mess with T&T. That was the message from Attorney General Anand Ramlogan yesterday as he announced that Government had emerged victorious with a $1.382 billion settlement from British Aerospace Engineering?Systems (BAE) over the cancellation of an order for three Offshore Patrol Vessels (OPVs).
"Government has agreed to pay BAE?not one red cent,"?Ramlogan added, announcing the settlement of the two-year dispute. Ramlogan said a diplomatic initiative by the British Government "bore fruit" in favour of the T&T Government. The settlement, he said, was a significant precedent for T&T and created legal history by successfully standing up to one of the world's biggest military defence companies.
Yesterday, in a brief statement, BAE?said: "The settlement with the T&T Government is at an amount consistent with provisions held." It said after the cancellation the three OPVs were subsequently sold to the Brazilian Navy under a contract signed in December 2011 and the first ship was handed over in June.
The London Financial Times reported yesterday that BAE had reached a settlement in the "long-running dispute with T&T." It added: "The settlement brings to a conclusion a disagreement that arose when Trinidad cancelled an order for the three boats following cost overruns and delays.
"The decision in 2010 came so late in the development phase of the contract that one of the three boats was ready to be delivered, prompting BAE to take a £100 million charge." The FT also quoted an analyst, Robert Stallard, as saying the deal "should be seen as a positive development because it reduced the company's political risk.
He noted that by 2012 BAE had received about £130 million as a working capital inflow from Brazil and had carried a trade liability of £125 million in deferred income relative to the settlement. Stallard was reported as saying the settlement was likely to be for £125-£130 million.
"There should be a net nil result in the working capital for the year as we understand Brazil has already paid for the ships," he added. A story in the Global Arbitration Review, however, quoted a similar number but in US dollars, not sterling. "BAE," it said, "has today agreed to pay US$131 million to the Government of Trinidad and Tobago to settle ICC arbitration proceedings over a shipbuilding contract."
At yesterday's media briefing, Ramlogan, claiming vindication against his critics, said the arbitration with BAE took place in?London in May, first on liability and then on the assessment of damages. Evidence was given by the AG, Commodore Garnett Best and Capt Mark Williams of the T&T Coast Guard. The agreement was reached on Tuesday.
Ramlogan added: "Subsequent to the arbitration hearing, which we thought went pretty well, a diplomatic initiative ensued under the auspices of the British High Commission and that initiative has borne fruit but not in the way some people thought it would. It has instead borne fruit in favour of the T&T?Government.
"BAE, as per the settlement agreement, has agreed to pay the Government of T&T and the people of T&T the sum of $1.382 billion in settlement of the claim against BAE. "The Government of T&T?has agreed to pay BAE not one red cent for their claim of over $600 million against Government.
"We are grateful to his Excellency (British High Commissioner) Arthur Snell for the diplomatic support he had provided to us in his efforts to settle this matter." Ramlogan paid tribute to the legal team of Joe Smouha, Alan Newman, John Almeida (of Charles Russell?LLP), Neena Poliah and others, including Jerry Hospedales,
He said there was no possibility of an appeal against the settlement since all parties had signed on the settlement agreement. ?The first payment towards the settlement will be over £100 million next January and a second payment next May. Because Government has paid off loans early, the State would have a windfall of $57.1 million which would have been interest payments on the loan, he added.
He said there would be further savings from the operational costs of the OPVs, whose recurrent costs would have been $32 million annually. Asked if the outcome meant the message on such issues was "don't mess with T&T,"?Ramlogan said: "Yes, it is."
He added: "It has a very positive impact that T&T?is about serious business and not a Third World banana republic. "It means for all international contractors, we will respect your contractual obligations and we want you to honour ours and if you don't, we are prepared to stand up and stand our ground to deal with the matter, no matter how powerful you are.
"It also says to my critics they should think twice before they open their mouth to criticise or condemn. I'm very serious about my job." Ramlogan slammed Opposition Leader Dr Keith Rowley, PNM?MP Colm Imbert and other critics who said Government would lose the arbitration. He said an October 28 newspaper story on the issue was "completely false, baseless, entirely misconceived and lacking factual premise."
The backstory
The vessels were ordered by the PNM administration in April 2007 in a total financial commitment of $2.192 billion. The PP?Government cancelled the vessels four months after assuming office in 2010
Prime Minister Kamla Persad-Bissessar cited technical deficiencies and delays. She said damages of over $61 million were overdue and payable by BAE to Government and Government would become entitled to, among other things, a full refund of money paid to BAE for the undelivered vessels. BAE went immediately to arbitration, claiming $611 million?from T&T. The Government countersued for $1.4 billion in damages.
Why the OPVs were cancelled?
In September 2010 when Government announced the cancellation of the OPVs, the Prime Minister's Office said the Government was exercising its contractual rights in cancelling the contract.
The office said the contractual rights were designed to protect the Government in circumstances where the Government was left with no other remedy and because of BAE's serious and persistent delays and technical deficiencies, Government had concluded that it was in its best interests to exercise this right.
With a contract of this size and importance, and with major delays already announced, it was incumbent on the new Government to review the OPV?project, the office?said. Government said during the early months of 2010, concern had been raised over the capabilities of the OPVs combat system.
BAE, it said, had proposed Government take delivery of the defective vessels despite combat-system defects that might prejudice the vessels' operational capability.
PNM CONFUSED
Confusing. That was PNM?MP?Colm Imbert's take on the Government/BAE settlement. "It's confusing. When you read the article on it in the Financial Times, it gives the impression BAE?was successful in arbitration, and the AG is saying T&T was successful. So I won't comment until I?get to the bottom of this."
Opposition Leader Keith Rowley, deputy leader Marlene McDonald and PNM?PRO?Faris?Al-Rawi didn't answer calls to their mobile phones. PNM?MP?Amery Browne said: "I'm seeking further facts on the matter. God knows the Treasury needs money."