Cur­tis Williams

The in­dem­ni­ty that the gov­ern­ment has agreed to grant the Board of Di­rec­tors of the Na­tion­al Gas Com­pa­ny may not be worth the pa­per it is writ­ten on ac­cord­ing to three Se­nior Coun­sels one of whom is a for­mer At­tor­ney Gen­er­al.

The Se­nior Coun­sels in­sist that un­der law Cor­po­ra­tion Sole has no such pow­er and that the mat­ter is open to ju­di­cial re­view.

They al­so say that the Kei­th Row­ley Ad­min­is­tra­tion is set­ting a dan­ger­ous prece­dence in grant­i­ng an in­dem­ni­ty to the Board of Di­rec­tors of the Na­tion­al Gas Com­pa­ny for spend­ing hun­dreds of mil­lions of dol­lars in an ill fat­ed at­tempt­ed to keep At­lantic LNG Trail 1 op­er­a­tional.

Ramesh Lawrence Ma­haraj who was part of the de­bate that brought in­to be­ing the Com­pa­nies Act of 1995 told the Busi­ness Guardian that it is clear on­ly the com­pa­ny can in­dem­ni­fy the Di­rec­tors and not the share­hold­er.

He ar­gued that the share­hold­er can­not make de­ci­sions for the com­pa­ny. This is the sole purview of the di­rec­tors who are re­quired to act hon­est­ly and pru­dent­ly in the best in­ter­est of the com­pa­ny (sec­tion 99 (1) of the Com­pa­nies Act Chap 81:01).

He said, “The ef­fect of all of this is that Cor­po­ra­tion Sole may be sus­cep­ti­ble to an ap­pli­ca­tion for ju­di­cial re­view of his (pre­vi­ous or fu­ture de­ci­sion) to grant an in­dem­ni­ty to NGC di­rec­tors which has the ef­fect of cre­at­ing a fu­ture li­a­bil­i­ty which re­wards wrong­do­ing. This is be­cause a di­rec­tor does not re­quire an in­dem­ni­ty if he is act­ing pru­dent­ly in the com­pa­ny’s best in­ter­est (sec­tion 99(2)) and, in any event, such an in­dem­ni­ty is giv­en by the com­pa­ny and not the share­hold­er. More­over, hav­ing re­gard to the dic­ta of Bereaux JA in ETECK supra, the in­dem­ni­ty is re­al­ly to pro­tect NGC di­rec­tors from fu­ture claims by an in­com­ing ad­min­is­tra­tion.”

Ma­haraj not­ed that in the ETECK mat­ter Jus­tice of Ap­peal Bereaux made the point that Cor­po­ra­tion Sole as a share­hold­er is not like­ly to bring a de­riv­a­tive claim un­der sec­tion 240 (1) of the Com­pa­nies Act against di­rec­tors ap­point­ed by the same gov­ern­ment.

He said, “In any event, in light of the po­lit­i­cal pa­tron­age that be­sets the ap­point­ment of di­rec­tors to the board of state en­ter­pris­es, it is hard­ly like­ly that any de­riv­a­tive ac­tion will be tak­en against di­rec­tors ap­point­ed by a sub­sist­ing gov­ern­ment.”

An­oth­er Se­nior Coun­sel who was pre­pared to speak off the record al­so sup­port­ed Ma­haraj’s point about the in­abil­i­ty of Cor­po­ra­tion Sole to grant the in­dem­ni­ty. He said, “I have doubts about that, whether his pow­er as Cor­po­ra­tion Sole would ex­tend to the giv­ing of an in­dem­ni­ty. I think his cor­po­rate pow­ers are re­strict­ed to deal­ing with the as­sets, for ex­am­ple in the case of shares, vot­ing shares, in the case of oth­er as­sets do­ing what­ev­er is di­rect­ly re­lat­ed to the safe keep­ing, in­vest­ment and so on of those as­sets. I think giv­ing an in­dem­ni­ty is more like a man­age­ment act and I don’t think ex­tend that way. I think that is the re­al ques­tion we have to grap­ple with and it would be very in­ter­est­ing to see who is ul­ti­mate­ly is the is­suer of the in­dem­ni­ty”

He said in a nor­mal set­ting a share­hold­er could pass a res­o­lu­tion rat­i­fy­ing the ac­tions, but then that cre­ates a bad prece­dence in the State en­ter­prise sec­tor.”

“It is a vi­cious cir­cle, be­cause if some­one want­ed to take ac­tion against the cor­po­ra­tion sole for giv­ing giv­ing an in­dem­ni­ty as cor­po­ra­tion sole, or in­deed for the com­pa­ny giv­ing such in­dem­ni­ty you will be su­ing your­self be­cause if you get an award of dam­ages or some­thing who you en­forc­ing it against? You en­forc­ing it against the state? We are the state be­cause these asets are held for us. So its a vi­cious cir­cle be­cause you su­ing your­self and that is why it is a bad thing to do.” not­ed the Se­nior Coun­sel.

Ma­haraj in­sist­ed that an in­dem­ni­fi­ca­tion can­not be rec­on­ciled with Cor­po­ra­tion Sole’s re­spon­si­bil­i­ty to look af­ter the pub­lic’s in­ter­est and pun­ish not re­ward di­rec­tors who con­tra­vene sec­tion 99 (1), (2).

He ex­plained that Sec­tion 101 (1) of the Com­pa­nies Act per­mits a com­pa­ny to in­dem­ni­fy a di­rec­tor against costs, charges and ex­pens­es rea­son­ably in­curred by him in de­fend­ing a claim brought against him as a di­rec­tor. This in­dem­ni­ty, how­ev­er, by sec­tion 101 (2) will not ap­ply if the di­rec­tor is guilty of a breach of sec­tion 99 (1) and (2).

“Sec­tion 3 (1) of the Min­is­ter of Fi­nance (In­cor­po­ra­tion) Act Chap 69:03 (Tab C) says that all NGC shares are held by Cor­po­ra­tion Sole in trust for the State but at sec­tion 3 (3), he may be sued in his cor­po­rate ca­pac­i­ty but on­ly in re­spect of any re­al or per­son­al prop­er­ty vest­ed in him. The NGC shares are vest­ed in Cor­po­ra­tion Sole as re­al or per­son­al prop­er­ty.” Ma­haraj posit­ed.

He point­ed to the Cord of Ap­peal mat­ter be­tween CEPEP and Oropouche MP Dr. Roodal Mooni­lal and the judge­ment of Jus­tice of Ap­peal Men­don­ca who said, “it can­not be dis­put­ed that the cen­tral gov­ern­ment has a lev­el of con­trol over the Ap­pel­lant. The Ap­pel­lant is owned by the State and the Min­is­ter of Fi­nance in his ca­pac­i­ty as cor­po­ra­tion sole is the sole share­hold­er…How­ev­er, the board of di­rec­tors is re­spon­si­ble for the man­age­ment of the com­pa­ny and it is with­in the board’s pow­ers, du­ties and dis­cre­tion to make a num­ber of de­ci­sions that would im­pact on the busi­ness of the com­pa­ny. I ac­cept that the sole share­hold­er of the com­pa­ny is in a po­si­tion to ex­er­cise con­trol over the di­rec­tors. But what is the ev­i­dence of the share­hold­er ex­er­cis­ing such con­trol? This is not re­al­ly ad­dressed in any way in the af­fi­davits be­fore the court.”

An­oth­er Se­nior Coun­sel who al­so want­ed to speak on con­di­tion of anonymi­ty said the is­sue of in­tent will be a ma­jor con­cern should the gov­ern­ment give an in­dem­ni­ty.

He said, “If a Board has to seek an in­dem­ni­ty, then it must raise a red flag as to whether they are ex­er­cis­ing their in­de­pen­dent, pro­fes­sion­al judge­ment and dis­cre­tion and act­ing in the best in­ter­est of the com­pa­ny which is their pri­ma­ry du­ty. If i am ask­ing for an in­dem­ni­ty it al­so rais­es red flags as to whether I was forced or co­erced in­to do­ing some­thing that was against my bet­ter judge­ment and knowl­edge and ex­per­tise. If a board takes a de­ci­sion in their col­lec­tive wis­dom they do no ask for an in­dem­ni­ty”

Karen Nunez-Tesheira who is a for­mer Law Lec­tur­er at the Hugh Wood­ing Law School and a For­mer Min­is­ter of Fi­nance and Cor­po­ra­tion Sole agreed with that point say­ing it ap­pears the Di­rec­tors were try­ing to avoid the Mal­colm Jones fate but in­sist­ed it was like­ly the In­dem­ni­ty could not hold in court.

“Clear­ly a Di­rec­tor, es­pe­cial­ly if it is a large com­pa­ny, a na­tion­al com­pa­ny with im­por­tance to T&T your fidu­cia­ry re­spon­si­bil­i­ties are enor­mous, and you ex­pose your­self to le­gal ac­tion be­ing tak­en by one of the oth­er share­hold­ers, in this case it could be bpTT of Shell or in change of gov­ern­ment as we saw with UTT and Pro­fes­sor (Ken) Julien and Mal­colm Jones and Petrotrin when the UNC gov­ern­ment was in pow­er, so clear­ly the re­quest for in­dem­ni­fi­ca­tion goes be­yond their con­cern with the cur­rent share­hold­ers in At­lantic Trains 1 to 4 but al­so any suc­ces­sor gov­ern­ment should they de­cide to do what the UNC did.”

The for­mer Cor­po­ra­tion Sole added, “I think the in­dem­ni­ty must stand the test of good faith, act­ing hon­est­ly or hav­ing rea­son­able grounds to be­lieve that your con­duct was law­ful and I am not quite sure giv­en the in­for­ma­tion that has been dis­closed that they may find them­selves be­ing able to reach that stan­dard of act­ing hon­est­ly or act­ing in good faith. So the in­dem­ni­ty may not help them un­der the statute.”

For Nunez-Tesheira there is a ma­jor dif­fer­ence be­tween State owned en­ter­pris­es and Statu­to­ry bod­ies like WASA.

“Dr Claude Den­bow had writ­ten an ar­ti­cle about the ques­tion of State En­ter­pris­es be­ing un­der a sep­a­rate piece of leg­is­la­tion than the com­pa­nies Act of 1995, but the fact is the Com­pa­nies Act says that State En­ter­pris­es, which are re­al­ly state owned com­pa­nies are gov­erned by the com­pa­nies Act which pro­vides for in­dem­ni­fi­ca­tion, li­a­bil­i­ty of di­rec­tors, which was al­ways part of the com­mon law and which had been cod­i­fied, so hav­ing said that State Owned En­ter­pris­es fall un­der the com­pa­nies Act who is to give in­dem­ni­fi­ca­tion to di­rec­tors it must be the com­pa­ny.”

Se­nior Coun­sel A calls it dodgy in the first and a cross ex­am­in­er’s dream.

He said , “I do not be­lieve that cor­po­ra­tion sole can give an in­dem­ni­ty as cor­po­ra­tion sole. He may be par­ty to a res­o­lu­tion that rat­i­fies the act. He can’t put us as tax­pay­ers in the line of fire for di­rec­tors who are in de­fault.

In what could has turned out to be a ma­jor scan­dal for the gov­ern­ment and state-owned Na­tion­al Gas Com­pa­ny, (NGC) con­fi­den­tial cor­re­spon­dence be­tween Fi­nance Min­is­ter Colm Im­bert and the Board of the NGC showed the Board seek­ing, and Im­bert agree­ing, to grant them per­son­al pro­tec­tion against be­ing held to ac­count should the com­pa­ny lose over $440 mil­lion in an ill-fat­ed at­tempt to save At­lantic LNG Train 1.

Thanks to a whis­tle-blow­er the Busi­ness Guardian ob­tained let­ters be­tween Im­bert and the Board of the NGC, cor­re­spon­dence among At­lantic LNG share­hold­ers, cor­re­spon­dence be­tween At­lantic LNG’s Pres­i­dent and NGC’s Pres­i­dent Mark Lo­quan that all paint a pic­ture of the Train 1 res­cue ef­fort be­ing in deep trou­ble and hun­dreds of mil­lions of tax­pay­ers dol­lars at risk.

At the cen­tre of the is­sue is the NGC and Kei­th Row­ley ad­min­is­tra­tion try­ing to keep At­lantic LNG Train 1 op­er­at­ing in the face of bpTT and Roy­al Dutch Shell, both the largest share­hold­ers of At­lantic Train 1 and the largest nat­ur­al gas pro­duc­ers, say­ing they do not have nat­ur­al gas to op­er­ate Train 1 and it should be shut down.

It must be re­mem­bered this was ini­tial­ly hap­pen­ing in De­cem­ber last year and fol­lowed sev­er­al oth­er plants clos­ing un­der the gov­ern­ment’s watch. The NGC said it want­ed to keep Train 1 op­er­a­tional even though it has lit­tle nat­ur­al gas of its own, pay for the turn­around (up­grade) and a month­ly main­te­nance fee to keep the plant ready for even­tu­al pro­duc­tion if the nat­ur­al gas could be lo­cat­ed.

High­ly placed NGC sources say it was a risky strat­e­gy led by the NGC’s CEO Mark Lo­quan and the pro­ject­ed loss to the com­pa­ny was US $64.7 mil­lion or TT $440 mil­lion.

In a let­ter dat­ed Feb­ru­ary 25th 2021 and ad­dressed to Fi­nance Min­is­ter Colm Im­bert, the Board of the NGC said it had in­vest­ed, with Im­bert’s agree­ment, US $24.7 mil­lion (TT $168M) in what it calls the “AL­NG Train 1 res­cue pack­age” and want­ed per­mis­sion to spend an­oth­er US$40 mil­lion ($272M) to the end of the year.

The let­ter read, “Ref­er­ence is made to our pre­vi­ous dis­cus­sions on the AL­NG Train 1 res­cue Pack­age and your pre­vi­ous non-ob­jec­tion to the NGC Fund­ing Agree­ment with AL­NG up to the pe­ri­od March 31, 2021 where­by the sum of US $24.7 mil­lion was ad­vanced. I wish to con­firm that the Board of Man­age­ment of NGC met yes­ter­day and ap­proved the fur­ther fund­ing agree­ment with AL­NG for the pe­ri­od April 1, 2021 to De­cem­ber 31, 2021 in the sum of US $40 mil­lion.”

The let­ter to Im­bert added that the de­ci­sion was made ‘af­ter re­view of the var­i­ous risks in­clud­ing the avail­abil­i­ty of gas and cash flow and al­so au­tho­rised NGC LNG to sign-off with mem­bers of AL­NG on the Fund­ing Agree­ment res­o­lu­tion to­day’.

As pre­vi­ous­ly in­di­cat­ed both Shell and bpTT, the largest nat­ur­al gas pro­duc­ers in the coun­try and largest share­hold­ers in Shell, had told the NGC and gov­ern­ment since 2020 they did not have gas to keep Train 1 run­ning and with a short­fall in nat­ur­al gas in the coun­try, in­clud­ing for the Point Lisas In­dus­tri­al Es­tate, this was a ma­jor risk to the NGC’s plan to keep Train 1 go­ing.

Aware of this and oth­er risks the NGC in the same let­ter dat­ed Feb­ru­ary 25th 2021 asked the Min­is­ter of Fi­nance to in­dem­ni­fy it, its sub­sidiary com­pa­ny NGC LNG and the di­rec­tors per­son­al­ly.

The Chair­man of the Board Con­rad Enill who signed to the let­ter and copied in the Pres­i­dent of the NGC Mark Lo­quan wrote to Im­bert and said, “We al­so pre­vi­ous­ly dis­cussed your com­mit­ment to in­dem­ni­fy the NGC com­pa­ny and Di­rec­tors for any claims or loss­es stem­ming from the Train 1 res­cue pack­age ($168M). Our re­quest is to ex­tend that in­dem­ni­ty to cov­er AL­NG fund­ing for the April 1, 2021 to De­cem­ber 31, 2021. NGC is al­so re­quired to in­dem­ni­fy its sub­sidiary NGC LNG which holds the 10 per­cent in­ter­est in Train 1.”

It must be re­mem­bered that both Enill and Lo­quan sit on both Boards and were seek­ing to be pro­tect­ed on both counts. In ad­di­tion the late Mal­colm Jones was tak­en to court by the UNC gov­ern­ment who sought to hold him per­son­al­ly ac­count­able for de­ci­sions he made as Chair­man of the Board of Petrotrin and the mat­ter was on­ly dis­con­tin­ued when the PNM got back in­to pow­er. An in­dem­ni­ty would pro­tect the NGC Board from such a fate.

By let­ter dat­ed Feb­ru­ary 8th 2021, two weeks be­fore the Feb­ru­ary 25th let­ter re­ferred to ear­li­er, the NGC sent a copy to Im­bert of the In­dem­ni­ty doc­u­ment ‘with the re­quired wa­ter­marks’ for the Board and com­pa­ny not to be held li­able should the first US24.7 mil­lion be lost while the sec­ond let­ter was to in­dem­ni­fy for the US $40 mil­lion there­fore en­sur­ing they could not be made to pay from their pock­ets if the deal failed and the en­tire $440 mil­lion was lost.