By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Government’s plans for Freeport were yesterday hit by “a pre-emptive strike”, with an outspoken QC now seeking Supreme Court declarations that its Business Licence regime and associated fees do not apply in the city until 2054.

Fred Smith QC, the Callenders & Co attorney and partner, told Tribune Business that his latest legal action is designed to eliminate “the complete red herring” that the Government can implement its Business Licence regime in the Port area prior to the Hawksbill Creek Agreement’s expiration.

Court documents obtained by Tribune Business show that Mr Smith is seeking Supreme Court declarations that his company, Smith Point Ltd, does not have apply for or obtain a Business Licence under the Government’s Business Licence Act.

The action, filed on February 1, also wants the courts to rule that Smith Point Ltd does not have to pay the fees/taxes demanded by the Business Licence Act, or make the associated returns filings.

The well-known QC is also seeking the exact same Supreme Court declarations for the Grand Bahama Port Authority’s (GBPA) other 3,500 licensees, thus ensuring the entire Freeport private sector is protected from any effort by the Government to impose the Business Licence regime upon the city.

All GBPA licensees are currently licensed, and pay the associated fees, to the Port Authority - not the central government in Nassau.

However, there have been indications that the Christie administration may be mulling whether to impose the Business Licence Act regime in Freeport, especially since it appears keen to reclaim governance and regulatory authority over the city from the GBPA.

Such fears have been bolstered by the report presented to the Government by its international consultants, McKinsey, which said it could earn almost $20 million from the imposition of Business Licence fees in Freeport.

Mr Smith yesterday described his legal action as “a pre-emptive strike” against any ambitions the Government might have to follow McKinsey’s advice, with the move seeking Supreme Court protection to protect licensee rights.

“To prevent the closure of my business, I have to stand on my rights,” he told Tribune Business, “and to protect the dozens of my employees, who are my family. Some of my employees have been with me for 35 years, and I don’t intend to put them out of a job.”

Mr Smith agreed that should his action succeed, “it will have the knock on effect of protecting other licensees and the Port Authority”.

He added: “They’re [the Government] not giving me anything by proposing to extend the Business Licence exemption. It’s not negotiable at all until 2054. It’s a red herring.

“The exemption from Business Licences is a complete red herring in Freeport. The Government has nothing to negotiate with in that regard. The McKinsey report was way wrong in saying that the Government would get $18-$20 million from Business Licences in Freeport.

“This is an action about protecting the rule of law in the Bahamas. The Government cannot irreparably abrogate commercial agreements that create constitutionally-protected rights.”

Mr Smith explained that the basis for his argument that the Business Licence Act does not apply in Freeport until 2054 comes from the Hawksbill Creek Agreement’s clause 2(23)(a).

This allows certain business categories and ventures to be conducted without first obtaining any license from the Government, and does not expire until August 2054.

However, the Hawksbill Creek Agreement’s clause 2(8), which ensures GBPA licensees are not subject to taxes on their earnings, is due to expire tomorrow - February 4, 2016.

Prime Minister Perry Christie is due today to make a major announcement on the Government’s strategy for Freeport’s economic growth and development.

He has already indicated that the Government will move the House of Assembly to extend Freeport’s expiring tax breaks and investment incentives for a further six months until early August 2016 but, with clause 2(8) at risk, that is clearly not good enough for Mr Smith.

“The plaintiff, therefore, wishes to establish clearly its continuing exemption from any obligations under the Business Licence Act under clause 2(23)(a), even after clause 2(8) of Hawksbill expires,” Mr Smith said in legal documents on behalf of Smith’s Point.

“It is important for the plaintiff, and all other Port Authority licensees carrying on business within the terms of clause 2(23)(a) of Hawksbill, to establish their rights under clause 2(23)(a), prior to or upon the expiration of the rights they currently enjoy under clause 2(8).”

Mr Smith argued that the Government’s current Business Licence practices showed that the Hawksbill Creek Agreement’s provisions exempted GBPA licensees from both the regime and its associated taxes/fees.

“Accordingly, by clause 23(2)(a) of Hawksbill, the plaintiff is entitled to carry out its business within the Port Area without having to obtain any permit or license from the Government,” Mr Smith argued on his company’s behalf.

“The plaintiff is therefore exempt from the obligation to obtain any Business Licence under the Business Licence Act until the expiry of the Hawksbill Creek Agreement on about August 4, 2054.”

Mr Smith argued that logic dictated that if GBPA licensees did not have to obtain a Business Licence from the central government, then they were also exempt from paying the associated fees and filing returns.

He told Tribune Business that GBPA licensees were protected from ‘double taxation’ - having to pay license fees to both the Government and Port Authority - by the Hawksbill Creek Agreement’s clause (2)(28).

Mr Smith said this clause mandated “that there should be no discriminatory treatment of licensees”, such as ‘double taxation’ from two Business Licence fees, given that such a scenario would only apply in Freeport and nowhere else in the Bahamas.

The two defendants in his action are the Prime Minister and Allyson Maynard-Gibson, as attorney general, while the GBPA has been joined as an ‘interested party’.