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Kawana Bay Developer Seeks Int’l. Arbitration Against Grenada – If Accepted, Govt. Would Have to Comply, Says Expert

 

True Blue Development Limited, the developer behind Grenada’s Kimpton Kawana Bay, has filed claims against the government of Grenada with the International Centre for Settlement of Investment Disputes (ICSID) over what the developer’s lawyer calls a “scheme by the Government of Grenada to thwart the successful completion” of the resort.

One specialist on international arbitration indicates that if True Blue Development is deemed to be a US investor “for the purposes of the Grenada-US bilateral investment treaty and the ICSID Convention,” the developer would have recourse to ICSID arbitration. Grenada’s government, moreover, would have “an obligation to comply with any ICSID award rendered from these arbitral proceedings.”

Background: Late last month, Warren Newfield, the principal of property development firm True Blue Development Limited, the company behind Grenada’s CBI-approved Kimpton Kawana Bay, resigned from his diplomatic post in the country and issued a letter in which he maintained that the country’s government had become “anti-business”. The government responded with claims to the contrary, claiming Newfield and his development had been under investigation and that this was what had instigated what they called a “pre-emptive” resignation. In an exclusive interview with IMI, Newfield alleged the government had “steadily and substantially been throwing up roadblocks to business development in key sectors and in particular the CBI industry.”

“The Government of Grenada destroyed a successful project”

In a statement released last night (which you can read in full here), True Blue Development writes that the filing “asserts that through its arbitrary and unlawful conduct, the Government of Grenada destroyed a successful project and inflicted damages on claimants, the CBI investors, and the economy of Grenada.”

The developer has engaged the legal services of BakerHostetler, whose Head of International Arbitration and Litigation – Mr. Mark Cymrot – has taken the lead on the case.

“The issues raised by the CBI committee and Government are flimsy and easily disproven, in some instances by the Government’s own records,” Mr. Cymrot said in the developer’s press release. “We are deeply concerned that this slipshod attack against a reputable developer is politically motivated or has some other improper purpose. Unfortunately, the ultimate losers here are the Grenadian people who will now lose jobs and vital tourism revenue as travel and hospitality return to the Caribbean.”

In the demand for arbitration, Cymrot wrote that the government had “not been candid about its motive for the senseless destruction of the five-star resort project that has been bringing substantial benefits to the Grenada economy. The Grenada Government has much it cannot explain.”

Discussing the decision to seek arbitration, Newfield commented that “as heartbreaking and perplexing as I find the government’s turnabout on Kimpton Kawana Bay, we have worked diligently to understand and resolve its sudden hostility. I underscore that our development group has diligently met all our obligations, while the government of Grenada has been deceitful. It is a disheartening end to what should be a jewel of a project for all of Grenada and the Caribbean.”

What is the ICSID and what type of enforcement power does it have?
Husein Haeri

IMI reached out to Mr. Husein Haeri, a partner in the international arbitration and public international law teams with London-based Withers Worldwide, to understand the implications of a property developer seeking arbitration against a sovereign state.

IMI: What is the ICSID and what type of enforcement power does it have?

Haeri: In order to promote international investment, States have concluded a number of investment treaties, most of which provide for access to international arbitration to investors in cases of treaty breaches by the host State where they have made their investment.

Arbitration under these treaties is often conducted under the auspices of the ICSID, which was established under an international convention in 1965. ICSID is a branch of the World Bank and has specific rules and procedures for international investment dispute settlement, including by way of investor-State arbitration. 

IMI: What are the practical implications of True Blue’s move in this case? Does Grenada have an obligation to consent to arbitration?

Haeri: In the specific case of True Blue et al v Grenada, we have found the request for arbitration published online (here). True Blue is invoking the 1986 US-Grenada bilateral investment treaty (BIT) (available here).

Article VI.3 of the treaty provides for access to ICSID arbitration, meaning that Grenada has consented in writing to arbitrate disputes arising from the US-Grenada BIT with qualifying investors. Grenada is now bound by this consent. Grenada signed the ICSID Convention on 24 May 1991 and the ICSID Convention entered into force for Grenada on 23 June 1991. The United States signed the ICSID Convention on 27 August 1965 and the ICSID Convention entered into force on 14 October 1966.

This means that True Blue, if deemed to be a US investor for the purposes of the Grenada-US BIT and the ICSID Convention, may have recourse to ICSID arbitration against Grenada and Grenada has an obligation to comply with any ICSID award rendered from this arbitral proceedings. 

The advantage of ICSID awards over other types of investment treaty arbitration is that they are directly enforceable before the domestic courts of the States signatory to the ICSID Convention.

ICSID awards may be subject to challenge, but only within the ICSID self-contained regime, namely through so-called annulment proceedings under the ICSID Convention. These proceedings are not an appeal before judicial courts, and the ICSID ad hoc committee does not have the power to review the evidence or factual points.

There are very limited circumstances in which annulment proceedings may be commenced and they include, for example, situations where the arbitral tribunal has exceeded its jurisdiction or where there was a breach of a fundamental rule of procedure. In practical terms, this means that, if the arbitral tribunal constituted to hear this dispute decides that Grenada has breached its obligations under the Grenada-US BIT, Grenada would have an obligation to pay compensation. Compensation would be assessed on the basis of True Blue’s damages caused by Grenada’s actions.

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The post Kawana Bay Developer Seeks Int’l. Arbitration Against Grenada – If Accepted, Govt. Would Have to Comply, Says Expert appeared first on Investment Migration Insider.

Warren Newfield Responds to PM Mitchell’s Claims in Exclusive Interview With IMI

 

In an IMI exclusive, Warren Newfield, who recently resigned from his post as Ambassador-At-Large and Grenadian General Consul in Florida, offers details on his version of the events that culminated in his stepping down and his reaction to government statements. Those initial statements left many questions unanswered and IMI has, therefore, raised further questions with both parties to the discussion. This is the first time Newfield has addressed the press since his resignation.

Important disclosures: IMI wishes to disclose that Kimpton Kawana Bay (KKB) has, on past occasions, been an advertiser on this platform, as have other Grenada-based CBI developers. IMI has also invited Mr. Warren’s counterpart, Grenada’s government, to elaborate on its version of events, which we will publish if and when we receive a response. If any reader feels we have given any party to this discussion preferential or unfair treatment, we encourage you to contact the editor on cn@imidaily.com.

You can skip directly to a particular response by clicking the linked questions below:


Mr. Newfield, there has been a lot of talk about your resignation, especially your statement that the current government has created an “anti-business” climate within Grenada. The government has stated through a press release that there were no recent changes in business operation or investment laws, so how did the climate within Grenada become anti-business in your opinion?

The government has steadily and substantially been throwing up roadblocks to business development in key sectors and in particular the CBI industry. The opinion is not mine alone.  One need only consider where Grenada falls in the World Bank’s most recent global rankings for “ease of doing business” in countries worldwide. In the 2020 edition, Grenada fell squarely into the bottom percentile—146th out of 190 countries ranked globally. That was the fourth lowest showing in the Americas, behind impoverished and hobbled nations like Venezuela, Haiti, and Surinam.

A specific example can be found in the recent ruling against Grenada by the World Bank’s arbitration arm, ICSID, in its dispute with the country’s electric utility GRENLEC. In awarding more than US$67 million, the Tribunal found that Grenada failed to comply with the terms of its long-standing investment agreement and made groundless charges of “willful malfeasance” as a defense. As someone officially charged to attract foreign investment and development into the country, and as someone involved in my own development project on the island, I witnessed this deterioration of conditions first-hand with arbitrary reversals of government commitments to the Kimpton Kawana Bay project.

In your resignation letter you appealed for change and a more level playing field, do you think your resignation can be a catalyst for actual change? What changes do you want to see?

My resignation was undertaken as a matter of conscience as well as practical necessity—I felt I could no longer faithfully represent the country as an ambassador and consul general in light of what I have perceived is a government posture markedly unwelcome to foreign investment. I would have felt a hypocrite had I continued to hold those roles.

Had I remained a diplomat, I would be restrained from taking the necessary steps to protect those CBI purchasers who have invested in Kawana Bay along with those who invest alongside me. As my letter stated, ‘I wish nothing more than a level and rational playing field for those who wish to do business, create jobs and grow the economy to ensure a bright future” for Grenada. If my action spurs others to step forward and add their voices for reform, then, absolutely, my own resignation can help bring about positive change for Grenada, which desperately needs help in moving forward.

The government’s statement said your “anti-business” claim was induced by an investigation into the Kimpton Kawana Bay project, and that an independent auditor has been approached to investigate the matter. Is there an ongoing investigation? Would you like to shed some more light on the status of the project?

Our independent auditors recently provided the government with confirmation that all CBI funds that Kawana Bay has collected have been used to develop the project and no developer fees have been paid out. The government’s insinuation that CBI funds have been misused is false. We have submitted quarterly reports detailing all expenditures for four years that have never been disputed by CBI, and we have always cooperated fully with government inquiries.

Kawana Bay has by far been the most successful CBI project since its development launch in 2017. Approximately 92% of available units at the property have been sold or committed for sale by international investors – despite the restrictions governing on-site visits during the pandemic over the past 15 months. That is striking testimony to how far we have come in upholding our side of the project.

In response to the government’s statement that your resignation was based on the ongoing investigation into your project, and not by the economic landscape in Grenada, do you believe there are other investors who share your sentiment?

As noted, my resignation is the culmination of a steady disregard by the government for the rule of law and an increasing lack of support for private enterprise. Believe me, if I thought what was happening was along the lines of minor speed bumps that are a normal part of doing business in a developing Caribbean economy, I would have happily worked to see them through. For me to resign my posts as ambassador-at-large and Consul General reveals how off the rails the government has gone in its approach to foreign business ventures.

In October 2020, the Prime Minister, Dr. Keith Mitchell said about Kawana Bay: “I must commend the project developers and investors for creating this idea and executing it.… We expect Grenada’s tourism product to be revived in the not-too-distant future and developments like these help to expand and improve our offering.” We are determined to ensure that the government fulfills its commitment to the CBI purchasers and to the project, which has the promise of jobs and other economic benefits for the country.

Prime Minister Mitchell said your resignation was a preemptive move and that you would have been stripped of your diplomatic status. Did you receive any notification of the kind?

I heard nothing from any government representative regarding any planned change to my diplomatic position. I assure you my resignation was motivated by my own strong sense of honor and personal integrity and not as a tactical move to quit before I was fired. There was nothing preemptive about it, other than my need to be in a position to take the necessary steps to protect the interests of CBI purchasers and my investors, which I could not do while serving as a diplomat.

You highlighted the government’s influence on Grenlec and its attempt to expropriate the Rex Hotel as signs of what you describe as an anti-business climate in Grenada, do you think CBI projects will undergo greater government influence or even direct management in the near future?

I believe that government oversight of CBI projects is important. That said, fair governance demands that regulations and oversight be applied consistently and without arbitrary changes, and administered by individuals who are independent, suitably qualified, and have the necessary skill set to understand the complexities of developing large hospitality projects. I am sure readers are well aware of the recent resignations of both the CEO and Chairman of the CBI unit, which provides evidence of the instability within the CBI program.

The opening of the hotel has been delayed on a few occasions in the past. Why have you needed to put off completing the project? 

Unfortunately, as is often the case with large-scale construction, unforeseen events affected the planned pace of construction. Whether design changes and upgrades in keeping with our international brand standards, import/shipping issues, or delays in the processing of the required final planning approval needed to start construction works on various phases, several unavoidable issues have contributed to the postponement of the expected completion date. Most recently, the direct and indirect impact of the Covid-19 pandemic has presented a serious challenge to the construction sector.

This led to further delays as a result of the temporary closure of our construction site and other factors outside of the developer’s control such as interruptions to supply chains, shipping delays, and mandatory reduction of labour force to comply with physical distancing requirements. We took very proactive steps to mitigate the delays caused by the pandemic, and after the end of the lockdown in Grenada, we were able to quickly recommence construction activities, albeit at reduced capacity. Our focus has always been on making every effort to see Kimpton Kawana Bay through to completion of construction and into operations as quickly as commercially practicable, always bearing in mind the interests of each one of our purchasers. Importantly, we have always kept our purchasers updated on the progress of the project.

In November last year, you announced that 312 sales were either in progress or complete and that the project was 74% sold. Today, you’ve indicated 92% of available units have been sold or have been committed for sale. Would such high sales rates not have raised the necessary capital to finish the project already, as the government asserts?

The numbers quoted are correct, but the parameters should be clarified. Sales in progress or completed include (i) purchasers who have already been approved for citizenship through CBI, (ii) purchasers who have submitted CBI applications and have not yet been approved, (iii) purchasers who have signed purchase agreements but have not yet submitted applications and (iv) purchasers who have reserved a unit for purchase pending signature of purchase agreements and are in the starting to gather documents for application submission. All these factors considered and yes, we are at 92% commitment on Kawana Bay inventory. That is truly an impressive commitment level in view of the unprecedented challenges of the past 15 months. 

However, the only funds raised to date have come from those purchasers who have already been approved for citizenship and have paid the investment amount. As the government can certainly confirm from its records, those purchaser funds do not cover the project budgeted costs as approved by the government in 2017 and reaffirmed in 2020.

Keith Mitchell has indicated you wanted to raise a further $40 million in CBI funds. Is this correct?

Yes, there remains approximately $40 Million to be raised based on the approved project budget. To date, the project developer has only received funds equal to approximately 59% of the approved project budget. If the government approves the purchaser commitments (as described above), the project would be approaching full funding. Based upon project sales, funding should not be an impediment to completing the project. 

It should be noted that as construction of the fourth and final building accelerates and the outfitting of all buildings get underway, the Kimpton Kawana Bay Project will employ approximately 200 workers. Once open, the hotel is expected to provide 300 direct jobs and the spin-off factor will provide for another 800 indirect jobs. This at a time when Grenada’s unemployment rate remained in excess of 15%, prior to the effects of the Covid-19 pandemic taken into account. 

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The post Warren Newfield Responds to PM Mitchell’s Claims in Exclusive Interview With IMI appeared first on Investment Migration Insider.

Grenada Ambassador and CBI Developer Resigns Over “Anti-Business” Policies – Govt. Responds With Counter-Allegations

 

Header image credit: Florida National News.

Grenadian Ambassador-At-Large and Consul General to Florida, Warren Newfield, tendered his resignation from those posts on the 20th of May, 2021. Newfield, who is the primary developer and driver of the Kimpton Kawana Bay Resort, a CBI-approved project on the Caribbean Island, said in his resignation letter that his home nation has become “anti-business”.

“It is with great sorrow but with absolute conviction of no other options that I write this letter to tender my official resignation as Ambassador at Large and Consul General to Florida on behalf of Grenada,” wrote Newfield in his resignation letter.

“Unfortunately, conditions in Grenada have changed drastically in the past few years. The country’s leadership, previously having the country’s best interests at heart, was welcoming to foreign investment and economic development, but has been transformed into an anti-business regime.”

Newfield indicated the current government had negatively affected many businesses, including his own, and highlighted that, under the current regime, Grenada ranks at 146th out 190 nations in the Ease of Doing Business report.

The now-former Ambassador-At-Large went on to highlight some of his concerns regarding the government’s actions: “The Government has breached agreements with other businesses. Other than the recent fiasco with Grenlec one only needs to look at the Government’s attempt to expropriate the Rex Hotel.”

Newfield said he hoped his resignation, after six years of service, can act as a catalyst for change that would create a better business environment for those who wish to do business within the country, saying: “I hope you and others will take this action as it is intended – as an appeal to restore reason and the rule of law to the Government and bring us back to a place where progress is possible in Grenada. I wish nothing more than a level and rational playing field for those who wish to do business, create jobs, and grow the economy in order to ensure a bright future for the youth of our wonderful country.”

Investigations triggered “anti-business” allegations, says Govt.

Now Grenada, a Grenadian news site, published a statement from the Government Information Service (GIS) responding to Newfield’s resignation, although that statement does not appear on the GIS site or the Government’s official press release webpage.

Responding to the specific claim that it had become “anti-business”, the statement pointed out that there has been no recent change in laws governing business operations or investments in Grenada.

“It must be noted that there has been no recent change in Government policy on business operations and investment. Therefore, the accusations are seen as a clear attempt to hurt the country and the Government. In fact, in recent years, Government has seen a marked increase in the level of investment in the country, with several major private sector projects currently underway in various parts of the country” the statement read.

The government, on its part, alleges that it was investigations into Newfield’s development that induced his resignation and that the Government has approached a private auditor to look into the matter.

“Government asserts that it was investigations into matters relating to Newfield’s Kimpton Kawana Bay project that triggered the ‘anti-business’ allegation. In light of its concerns, Government has already approached an independent auditor to investigate the matter.”

The statement shed some light on the nature of the investigation into Kawana Bay:

“Government is keen to ensure that all money invested into projects under the Citizenship by Investment (CBI) program are in fact used in accordance with the provisions of the country’s Citizenship by Investment Act. In so doing, Government further seeks to protect the integrity of the CBI program, ensuring greater accountability and transparency in the execution of projects and safeguarding the resources of investors.”

PM Mitchell: Resignation was “pre-emptive”

Grenada’s PM Mitchell echoed the statement during a sitting of the House of Representatives held on Friday the 21st of May, asserting that it was clear that the resignation was not concerning any issue with diplomatic representation but instead with government policies relating to the country’s CBI program, MENAFN reported.

Mitchell quoted Section 7 of the Grenada Citizenship by Investment (Approved Projects Investment) Regulations which states that every developer shall use all qualifying investment amounts received for an approved project for the sole purpose of the development of the particular approved project. 

According to this legislation, all CBI project developers must hold at least 20% of incoming investments in an escrow account. Mitchell said this law, along with the Government’s refusal to work around or change it, played a major role in the resignation of Newfield:

“He put down the 20% but then decided that he had to recoup it […] this is what brought on the hostility,” said Mitchell. “So, if the construction cost as the engineer pointed out, the cost is 30-something million dollars and you collected over 50-something million dollars already, you still want another 40-something million dollars in our applications,” explained PM Mitchell.

“I mean, I could not understand, this is what brought the whole thing down, so we said no, we are not going to give you that large excess of money, what are you doing with it, it’s certainly not being brought to Grenada to invest in the development of the country.” 

Mitchell characterized Newfield’s resignation as a preemptive measure “because he had been warned that he would be stripped of his diplomatic status.”

In response to Newfield’s statements about Grenlec, Grenada’s national electricity service, Mitchell said that “if we are considered to be anti-business/anti-investor because we have decided that GRENLEC, our national security asset, the only electricity service in the country, must be influenced, not necessarily owned, but influenced by the government and people of this country, I am proud to be anti-business and I’m sure other members of the government would be extremely proud as well.”

The PM also addressed the former Ambassador’s claims about the Rex Hotel:

”The Government never attempted to purchase the hotel, nor is it in the plans. In fact, the property has been developed by Royalton Luxury Resorts.”

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The post Grenada Ambassador and CBI Developer Resigns Over “Anti-Business” Policies – Govt. Responds With Counter-Allegations appeared first on Investment Migration Insider.