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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.

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.