Arbitration court awards damages to Belize banks

The London Court of International Arbitration on 20 August 2009 awarded BDB Holdings and Belize Bank Limited BZ$44 million (US$22 million) in damages and costs for the breach of contractual warranties given by the previous government of Belize. The two companies immediately filed proceedings in the Belize Supreme Court to recognise and enforce the award.

A release by BCB Holdings stated that it is the third time in just over a year that an international arbitral award has been issued against the government of Belize by an international arbitral tribunal. According to the release latest award brings the total amount owed by the government in damages to various companies to over BZ$90 million (US$45 million). The government has so far refused to pay any damages.

The latest dispute involves contested business and income tax liabilities. Belize Bank has maintained that the former administration had entered into an agreement over the non-payment of taxes with the bank in 2006 ‘as a part of a settlement of earlier disputes between the parties and (that the agreement) was honoured by the Government and the Commissioner of Income Tax for two years prior to its breach.’

According to reports by Belize newspaper Amandala Prime Minister Dean Barrow already declared the government will resist any attempt to enforce the ruling, because the agreements, on which the damages are based, are in his opinion unlawful and immoral. He is confident that Belize’s Supreme Court will not enforce the LCIA ruling and rule, as it has in a previous case, that the underlying agreement between the government and the bank is illegal.

BCB accused the government of ‘cherry picking which arbitral awards it will recognise as legally binding’, referring to a tribunal decision against Belize Bank that was in the government’s favour. The LCIA had found that the settlement agreement over a $10 million Venezuelan grant between the former administration and Belize Bank violated both the Finance and Audit Act and the Belize Constitution.

Mr Barrow said he could not understand how the LCIA could make one ruling upholding the laws of Belize and another, concerning the Belize Bank tax agreement, running contrary to the Laws of Belize.

Belize’s previous government named the LCIA as the jurisdiction for the settlement of contractual disputes in some of its agreements. However, the current government has from the outset declined to defend proceedings at the LCIA and focused on defending the enforcement of any rulings in Belize.