Consolidated Water’s British Virgin Islands affiliate Ocean Conversion has received a favourable ruling from the Eastern Caribbean Supreme Court of Appeals with regard to an ownership dispute with British Virgin Islands government over the Baughers Bay desalination plant at Baughers Bay, Tortola. The Appellate Court awarded compensation to Ocean Conversion for improvements the company made to the plant before the BVI government in 2006 notified OC-BVI that it was asserting a right of ownership over the Baughers Bay plant.
The dispute stems from a contract concluded 19 years ago to construct the plant on government-owned land and produce and deliver water to the government. The contract was structured initially for seven years and provided the government with the option of purchasing the plant for $1.125 million before the contract expired. As the government did not elect to purchase the plant the contract was automatically renewed for another seven years, at the end of which the plant would become the property of the government without further payment.
At the end of the second seven-year term Ocean Conversion wrote to the government asking for a meeting to discuss future arrangements. The government argued that it now owned the production plant and issued a notice of vesting.
In addition, the BVI government ceased paying OC-BVI the price for the water supplied from the Baughers Bay plant that was in effect between the parties prior to the ownership dispute, stating that OC-BVI was only entitled to be paid for its costs to produce the water it supplied from Baughers Bay.
In litigation before the Eastern Caribbean Supreme Court the BVI government sought ownership of the Baughers Bay plant without any compensation to Ocean Conversion. Ocean Conversion asserted it still had ownership in the plant, because of investments it had made, in response to government pressure, to increase production capacity beyond what was contractually agreed.
As a result the company maintained it had the right to continue owning and operating the plant until it was reimbursed for its ownership share, which it estimated at $4.7 million. In the meantime the company continued to supply water to the government.
On 28 October, 2009, the Supreme Court granted ownership of the Baughers Bay plant to the BVI government and ordered the BVI government to pay OC-BVI an additional $10.4 million for the water supplied. However, the court denied OC-BVI’s claim for compensation for the plant improvements.
Both parties filed appeals to the judgment in October 2009. The BVI government has since paid $5 million of the $10.4 million awarded by the Supreme Court to Ocean Conversion.
In its ruling dated 18 April, 2012, the Appellate Court, dismissed the BVI government’s appeal against the judgment of the Supreme Court awarding $10.4 million for the water supplied. Furthermore the Appellate Court awarded OC-BVI compensation for improvements made to the plant in the amount equal to the difference between the value of the Baughers Bay plant at the date OC-BVI transferred possession of the plant to the BVI government and $1.42 million, which represents the purchase price for the Baughers Bay plant under the water supply agreement previously in effect. OC-BVI was also awarded all of its court costs at the trial level and two-thirds of such costs incurred on appeal.
“We and our partners in OC-BVI are very pleased with the ruling of the Appellate Court and hope that this now ends a long running legal saga which started in late 2007,” said Consolidated Water Chief Executive Officer Rick McTaggart. “Prior to this legal dispute, OC-BVI pursued, for many months, an acceptable compromise with the BVI government that would allow continuation of a long-term, proven, mutually beneficial water supply arrangement without the need for legal action,” he said. “Unfortunately, OC-BVI was ultimately required to pursue all legal remedies, including an appeal. We believe quite strongly in the integrity of OC-BVI’s actions in this matter, in OC-BVI’s legal position, and in the fairness and quality of the water supply services OC-BVI provided from the Baughers Bay plant for two decades,” Mr. McTaggart added.
Given that the BVI government has the opportunity to appeal within 42 days the decision of the Appellate Court by taking it to the Privy Council in England, the amounts awarded to Ocean Conversion by the Appellate Court will not be reflected in Consolidated Water’s earnings until they are paid by the BVI government, Mr. McTaggart noted.