By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The three-strong arbitration panel that will decide Freeport's fate has retired to determine its verdict on whether the Grand Bahama Port Authority (GBPA) owes the Government some $357m.

Tribune Business understands that the panel, chaired by Sir Anthony Smellie KC, former chief justice of the Cayman Islands, and the two UK law lords - Lord Neuberger of Abbotsbury and Dame Elizabeth Gloster - have given no timeline for when a decision will be released after the two-week arbitration proceedings finished in Nassau last Friday, September 19.

Given the amount of material and documents, some dating from the 1950s and 1960s, that they have to analyse, along with witness statements, trial transcripts and other evidence, it is thought possible that a decision may not be handed down before year-end and the outcome not determined until the 2026 New Year.

This newspaper understands that the arbitration panel's decision could be the final verdict in a dispute whose outcome will potentially have a profound impact on Freeport’s future governance and development, as well as ramifications for the city’s economy, the GBPA’s estimated 3,000-plus business licensees and the wider Bahamas.

It is thought that there is no automatic right, or pathway, for the losing or any aggrieved party to appeal the panel's verdict to the Supreme Court. Such an appeal can only be mounted with the consent and approval of both parties - the GBPA and the Government - and neither is likely to agree to a further challenge to a decision that favours themselves.

Tribune Business also understands that, under The Bahamas' existing Arbitration Act, the panel's verdict is confidential and will not be publicly disclosed unless, again, both parties agree to this. The loser, whether the Government or the GBPA, is unlikely to consent to public disclosure.

However, the battle between the Government and Freeport's quasi-governmental authority has huge public interest implications given the impact the outcome will have for the future governance of The Bahamas' second city, its businesses and residents and, potentially, the GBPA's continued ownership by the Hayward and St George families.

The sum demanded by the Government is likely to have increased significantly since the $357m arbitration claim was launched given that the Davis administration has signalled in its annual Budget that it intends to bill the GBPA, Freeport’s quasi-governmental authority, for $75m every year to fund incurred expenses that are not covered by tax revenues generated in the Port area.

These annual billings were to take effect every year from 2024-2025, meaning that - at least in the Government’s eyes - a further $75m is already outstanding, which would take the total now demanded to $432m. And, given that it is now the 2025-2026 fiscal year, a further $75m is coming due. Many observers believe the GBPA owes something; it is just a question of how much.

The PricewaterhouseCoopers (PwC) accounting firm was hired by the Government to analyse, and calculate, just how much the GBPA owes the Public Treasury for public spending in Freeport that exceeds the tax revenues generated by the city. The GBPA denies that anything is owed, alleging that Freeport contributes around $200m annually in tax revenues.

However, the Government is seeking reimbursement of the claimed $357m under section one, sub-clause five, of the Hawksbill Creek Agreement, Freeport’s founding treaty, which stipulates that it can demand payment from the GBPA for providing “certain activities and services” if the costs involved exceed certain tax revenue streams generated in the city.

The original 1955 clause required the GBPA to provide rent-free office and living accommodation to government employees involved in “the maintenance of law and order, the administration of justice, the general administration of Government, the collection of Customs Duties and other revenue and the administration of the Customs Department the administration of the Immigration Department, Post Offices” and other functions to be mutually agreed.

The GBPA was also required to “reimburse the Government annually” within 30 days of detailed accounts being presented by the latter, but only if “Customs Duties and emergency taxes received by the Government in respect of goods entered or taken out of bond at the Port Area are less than the amount” spent by the Government.

Multiple sources have questioned why the Government has waited until now - some 60 years or six decades - to try and enforce a Hawksbill Creek Agreement clause dating from the 1950s and 1960s. They argue that it smacks of the Davis administration using this as leverage to force the Haywards and St Georges, the GBPA owners, to sell and exit after they declined to accept the Government’s purchase offer.

Prime Minister Philip Davis KC has consistently asserted that fundamental change is required for Freeport to achieve its true economic potential. He has argued that the GBPA has failed to live up to its governance and development obligations under the city’s founding treaty, the Hawksbill Creek Agreement, and that the two St George families are not up to the task required.

And the Hawksbill Creek Agreement clause at the centre of the dispute may not be all it seems. It was last amended in 1960, when Freeport was five years-old, the city’s development very much in its infancy, and the only revenues earned by the Public Treasury at the time from the Port area were Customs duties.

While it indeed stipulates that the Government should not spend any more in the Port area than it earns in revenues, and that any excess costs over and above the latter should be reimbursed by the GBPA, that clause has not been amended to account for either the Freeport of today or multiple taxes that have been added since then.

Thus VAT, departure taxes and a host of other revenue streams have to be factored into the calculation of whether the Government is spending more than it is earning in Freeport. Several sources have suggested that, rather than go to arbitration, the two sides should instead negotiate amendments to section one, sub-clause five of the Hawksbill Creek Agreement to ensure it is fit for purpose and attuned to the modern world’s realities.