British American's regional shareholders lose claim over Clico bailout

REGIONAL British American Insurance Co Ltd (BAICO) shareholders from Antigua and Barbuda and Grenada have lost their discrimination claim against Trinidad and Tobago over the 2009 bailout of CL Financial (CLF).

On October 22, CCJ President Justice Adrian Saunders and Justices Winston Anderson, Maureen Rajnauth-Lee, Andrew Burgess and Peter Jamadar dismissed their complaint of discriminatory practices by TT following the collapse of CL Financial.

Saunders delivered a summary of the court’s ruling, dismissing the BAICO policyholders’ claims.

The group’s members claimed TT discriminated against them when it decided to bailout CLF and its local subsidiaries Colonial Life Insurance Company (Trinidad) Ltd (Clico), Clico Investment Bank (CIB), and British American Insurance Company (Trinidad) Ltd (BAT).

The group alleged that while local policyholders were protected and essentially guaranteed their full investments, they could only recoup approximately 14 per cent through liquidating the regional subsidiary.

They contended that the action amounted to discrimination on the grounds of nationality and was in breach of Article 7 of the Revised Treaty of Chaguaramas (RTC).

They further contended that the action also breached Articles 36 and 184(1)(j) of the RTC, which deals with the cross-border provision of services and measures member states took to provide redress for regional consumers.

However, in March 2023, the judges dismissed part of the complaint while allowing the group to continue to pursue their argument of an alleged breach of Article 184(1)(j) (failure to promote the interests of consumers in the community) and Article 7.

In their ruling on October 22, summarised by the CCJ’s president, the “presumed failure to abide by Article 184 did not create liability for individual member states of the community.”

The summary further noted that allegations of breaches of Articles 7 and 184 both depended on whether the BAICO policyholders were consumers.

However, the CCJ held that since these issues were not fully argued, the court did not decide.

The court’s opinion also noted that Article 184, which required member states to provide “adequate and effective redress for consumers” could not be read in isolation from a broader legal context. Specifically, he said the language used specifically in Article 184 was not “always conducive to allocating state liability for breach” and it was not “permissible to pluck a single provision from the list to give it a special legal status.”

“It was therefore not the intention of the framers of the RTC to ascribe state liability in respect of a particular action by a state outside an agreed regional framework.”

On the BAICO policyholders’ claim that TT exercised emergency powers to prevent them from enforcing rights to CLF’s assets, the court noted arguments from Caricom’s legal counsel that legislation adopted by a member state did not apply extra-territorially.

“And, as noted by Caricom, the RTC does not contain language which obliges member states to provide mechanisms to facilitate the extraterritorial reach of its legislative/political/judicial decisions to other member states.”

“The defendant could not have assumed control of BAICO by way of amendments to its Central Bank Act to guarantee that BAICO policyholders and/or depositors were afforded remedies in the aftermath of CLF’s collapse.

“To do so would have been to have acted in an extra-territorial manner that would have been, in the absence of regional agreement, contrary to the comity of Caricom member states.”

The CCJ also ruled that the BAICO policyholders did not prove they were discriminated against based on nationality only.

“To establish discrimination under Article 7, the claimants must have established that they were treated worse or less favourably than persons whose circumstances are similar to theirs (the comparators), except for their and the comparators’ nationality; and that there was no objective and reasonable justification for the difference in treatment and that the worse or less favourable treatment occurred in the context of activity that was within the scope of the RTC.

“The court found that the circumstances of policyholders of Clico, BAT and CIB were not similar to BAICO policyholders.”

The government’s bailout, the judges noted, was a move aimed at preventing “severe dislocation” to the economy.

“The court noted that if the claimants’ arguments were correct, it would mean that the defendant would have been responsible for bailing out all BAICO policyholders in other Caribbean territories.

“The court found that it could not have been within the contemplation of the framers of the RTC that the member state in such circumstances, would be obliged to compensate all BAICO policyholders in all Caricom states for all their loss and damage.”

It was for this reason, the CCJ found that the action was a reasonably justifiable objective.

“There was no obligation to extend any relief to institutions outside of the defendant member state and therefore, no right in the claimants to obtain the relief they sought.”

In rejecting the BAICO policyholders’ arguments, Deborah Peake, SC, who led the legal team for TT, had argued that the RTC was for free trade within the customs union and was not aimed at frustrating a Government from protecting its country as Clico’s collapse posed serious repercussions for TT.

Rejecting the group’s claims, Peake said the group’s litigation was a stretch that had no ground at all.

“It is hopeless without merit and should be dismissed.”

She said when the memorandum of understanding was signed for the bailout, it was for CIB, Clico and BAT not the other subsidiaries of CLF.

“This case assumes that they were under consideration.”

She also said the group had to prove that the Government knowingly excluded regional policyholders.

In arguments in support of the group’s claims, King’s Counsel Simon Davenport, who led a team for the BAICO shareholders, had argued that assets of the Bahamas-registered insurance subsidiary (BAICO) were put into a common pot by CLF but should have been segregated to meet BAICO’s liabilities.

He said TT should not have been allowed to “have its cake and eat it too” by depriving BAICO of its assets without meeting its liabilities.

“Notwithstanding the entities and regulatory environments, our position is that the TT government brought into a common pot, the resources of BAICO, and in exercising the bailout activity, it should have done so on a non-discriminatory basis.

“TT refused to pay BAICO liabilities from the common pot,” Davenport said, insisting that BAICO was entitled to its liabilities in the same way the other CLF subsidiaries had benefitted in the bailout.

He said the move unfairly impacted the lives of “thousands of families across the Caribbean many of whom lost their savings, retirement and pension benefits leading to immeasurable hardships.”

“This is a story of inequity… People are dying of poverty as a consequence of this.”

The group’s attorneys had also argued that national interest did not displace the RTC.

In 2017, the government successfully petitioned High Court judge Kevin Ramcharan to liquidate CLF to clear the remainder of the debt it incurred in rescuing the cash-strapped conglomerate. The process is still ongoing. The joint liquidators delivered its 13th report to the court on October 16.

In December last year, the Central Bank relinquished emergency control of Clico.

The regional BAICO policyholders were also represented by Carsten Zatschier, SC, Dr Kenny Anthony, Robert Strang, Gregory Pantin, Matthew Happold, George Kimon, and Miguel Vasquez.

The state of TT was also represented by Tamara Toolsie, Brent James and Murvani Ojah-Maharaj. Lisa Shoman, SC, Radha Permanand and O’Neil Francis represented Caricom.