A Welsh supermarket-chain which took over Booker Cash and Carry is seeking to recover 13 million pounds sterling (US$20M) in compensation from Guyana for the nationalisation of the sugar industry 27 years ago.
The Iceland Group which took over Booker Cash & Carry two years ago and became the Big Food Group has mounted the legal challenge in Washington before the International Centre for the Settlement of Disputes (ICSID).
The Group has taken advantage of a bilateral investment treaty between Guyana and the United Kingdom in which Guyana consented to arbitration in cases of dispute. The final adjudication hearing of the case is fixed for March 31, and will run for four days in London before French professor Brigitte Stern, the sole arbitrator.
The claim by the Big Food Group on behalf of Bookers PlC is that nationalisation was forced upon the Bookers Group in 1976. Bookers Sugar Estates Limited at the time had owned 80% of the sugar industry and the Demerara Company had owned 20% (but had had its share nationalised the previous year). The government merged the two and formed Guysuco in 1976.
The Big Food Group is seeking to recover monies due on a series of unpaid promissory notes the government issued to Bookers to buy and take into public ownership Bookers' assets in the sugar industry as well as others. Bookers was involved in shipping and stores, among other businesses.
The sum of 6.8 million pounds sterling in principal is being sought as well as interest and cost of the proceedings, which when added, exceed 13 million pounds. The government has retained former Attorney General Fenton Ramsahoye to represent it at the hearing.
The outcome of the case could be crucial for Guyana's debt forgiveness drive, given that Paris Club creditors have demanded creditor comparability as a condition to the Naples terms (a 67% write-off of the country's debt stock) in 1996; further relief under the Heavily Indebted Poor Countries (HIPC) Initiative in2000; as well as relief under the enhanced-HIPC framework.
What is ironic is the World Bank, one of the organisations demanding creditor comparability, partly finances the operations of ICSID. It is likely that ICSID could give a ruling in Iceland's favour and against the initiatives taken by the Bank and other bilateral creditors, including the United Kingdom, to make manageable the external debt burden of Guyana. Bookers was a commercial creditor.
The Guyana government's response has been that the group is a "rogue creditor" suing a HIPC country which is refusing to accord the government any debt relief under the Paris Club arrangements. The government argues that since its debt agreements and bilateral investment treaty are all binding in international law, it cannot treat Iceland any differently.
It is seeking a declaration that ICSID is not entitled to make an award under a bilateral investment treaty with the United Kingdom without providing for debt relief under the debt agreements Guyana has with the country.
Guyana further argues that any award against it by ICSID would further jeopardise Guyana's economic recovery which the debt relief initiatives aim for.
Sources say the government would be seeking the World Bank's assistance to meet the arbitration costs, estimated at US$400,000 and further sums to resist the enforcement of any ICSID award against Guyana. The government, the sources say, would seek to access resources from the HIPC trust fund to meet these costs. The government would also seek the Bank's assistance to meet any award made by ICSID.
The government is reported to be seeking the British government's co-operation in the matter. British companies are entitled to tax relief on overseas debts not recovered and the government is reportedly moving to secure a guarantee that this would apply to the Big Food Group to allow for a compromise in the government defaulting on its payment or on an award by ICSID.
The Big Food Group's demand for payment of the outstanding debt is based on arguments that Bookers was not party to the debt agreements the Guyana government has with the United Kingdom and therefore is not bound by the comparability clause which prevents Guyana from treating any other creditors more favourably.
The move to arbitration by the Big Food Group was made in September 2001 but the multi-billion dollar company has since been criticised by the Jubilee Debt Campaign for its move to recover the sums from one of the world's poorest countries, especially when the creditor was able to cope without any repayment on the debt for 13 years. Servicing of this original 11 million pounds sterling debt is reported to have stopped in 1988.
The Wales on Sunday newspaper earlier this month reported a Big Food Group spokesman as saying that the compensation the government awarded to it of 11 million pounds was only a fraction of the value of the expropriated sugar assets. These assets, the official said, were valued at 186 million pounds sterling in 2000.
The official also said it was not a case of a rich corporation mistreating a small developing nation as Booker has maintained supportive relations with Guyana.