Case of the Day: BCB Holdings Ltd. v. Attorney General of Belize
Posted on August 5, 2013
The case of the day is BCB Holdings Ltd. v. Attorney General of Belize (C.C.J. 2013). It is, I think, our first case from the Caribbean Court of Justice. In order to settle a commercial dispute, BCB Holdings Ltd. and the Belize Bank, Ltd. entered into a settlement agreement with the government of Belize in 2005. The gist of the settlement was that the two companies would enjoy “a tax regime specially crafted for them and at variance with the tax laws of Belize.” The agreement was signed by the Minister of Finance and the Attorney General, and it had a confidentiality provision. Indeed, the agreement was so confidential that for more than a year, “the Commissioner of Income Tax was unaware of the Deed’s existence or its implications”!
The Belize government honored the agreement for two years, but in 2008, after a new government came into office following a general election, the government repudiated the agreement and sought to require the companies to pay the taxes owed for those two years under the generally applicable tax laws. The companies then demanded arbitration before the London Court of International Arbitration.
Belize did not participate in the arbitration. The tribunal decided that the settlement agreement was a valid exercise of the Belize government’s prerogative powers and that it was specifically authorized by Belize law, specifically § 95 of the Income and Business Tax Act. Its award was, therefore, in favor of the companies.
The companies then sought enforcement of the award in Belize. They prevailed in the trial court. On appeal, the Court of Appeal reversed on the grounds that the Arbitration (Amendment) Ordinance No. 21 of 1980, the law under which the companies had sought enforcement, was invalid. Justice Saunders (President of the CCJ), in his judgment, called the Court of Appeal’s decision to base its decision only on this ground “a matter of great regret.”
The companies then appealed to the CCJ. Because of the grounds on which the Court of Appeal had decided the case, the court first needed to decide whether the Arbitration Ordinance was valid. The basic question was whether the ordinance was ultra vires. The difficulty arose because the ordinance was expressly enacted to give effect to the New York Convention, but at the time the executive (at the time, the British government) had not yet extended the effect of the Convention to Belize, and the decision whether to extend the treaty to Belize was within the Crown’s exclusive prerogative powers. But the CCJ held that the colonial legislature had the power to provide for the enforcement of arbitral awards falling under the Convention even if the treaty was not yet effective as to Belize. As Judge Mendes wrote in a dissent in the Court of Appeal: “It does not seem to me to make one jot of difference that the terms in which the legislative will of the [Belize] legislature was expressed was inspired or was intended to replicate or indeed was intended to give effect to an existing treaty by which [Belize] was not yet bound. Such a legislative act does not intrude into the domain of external affairs.” The CCJ agreed.
The court then turned to the public policy issue. The problem was separation of powers. Yes, Belize has the power to settle commercial disputes, and yes, it can do so confidentially if it likes. But in the judges’ view, what the executive had done was to “unilaterally provide exceptions from the country’s revenue laws on the strength of Executive prerogative,” and to invade the legislature’s lawmaking role. Moreover, the executive had not written on a blank slate but had derogated from statute. “[W]hen the exercise of some governmental function is regulated by statute, the prerogative power under which the same function might previously have been exercised is superseded.”
In light of these policy considerations, the court found that the grounds for non-enforcement were “compelling.”
The sovereignty of Parliament subject only to the supremacy of the Constitution is a core constitutional value. So too is the principle of the Separation of Powers the observance of which one is entitled to take for granted. To disregard these values is to attack the foundations upon which the rule of law and democracy are constructed throughout the Caribbean.