- 03 JUN 2022
Prime Minister’s Statement in Parliament on Construtora OAS Ltd and The Solomon Hochoy Highway to Point Fortin – Friday 03rd June, 2022
STATEMENT OF THE HON. PRIME MINISTER
CONSTRUTORA OAS Ltd
And THE SOLOMON HOCHOY HIGHWAY TO
Madame Speaker I have been authorized by the Cabinet to make the following statement.
It has become necessary to place on the Parliament’s record, the facts with respect to the pertinent issues surrounding the contractual and other arrangements related to the extension of the Solomon Hochoy Highway to Point Fortin by a Brazilian company called, Construtora OAS S.A. (“OAS”).
Madam Speaker, as I do this, I bring to the attention of this honourable House a matter of great “general public importance” having regard to the Preamble to our Constitution, (b), (c), (d), and (e) AND, section 4 (a), the due process of law;
I want to remind the House of the fundamental principles of good governance and respect for and adherence to due process and accountability, to be separated from the issue of the proper interpretation of the clauses of the OAS contract which the High Court is being asked to determine in the appeal from the Arbitration Award.
Madame Speaker, this project is the single largest contract ever entered into by the state of Trinidad and Tobago, 5.2 billion dollars. That alone demands that the accurate, undisputed facts are placed before the people of Trinidad and Tobago.
It is to be noted that this is the second Ministerial Statement that has been made in the Parliament by my government with respect to events related to OAS and the Point Fortin Highway. The first was on April 1st, 2016. It was delivered by the Hon. Member for Port of Spain North/St Ann’s West who, at that time, held the portfolio of Minister in the Ministry of the Attorney General and Legal Affairs and Minister in the Office of the Prime Minister.
Madam Speaker, it was in that Ministerial statement that we alerted the population to what we had recently discovered as we dealt with OAS, who had in late 2015, and into early 2016, basically stopped all works on the troubled Highway project. At that time abandoned workers were protesting daily, sub-contractors were claiming hundreds of millions of dollars being owed to them by an absent OAS, equipment was being seized, most of the expatriate OAS staff had left Trinidad and Tobago and no progress was being made by OAS on the Highway construction. It was at this time and in these circumstances that the Government had to intervene to pay desperate, disadvantaged and abandoned workers.
Madame Speaker, that April 1st, 2016 statement informed the population, of an amendment to the OAS contract that we discovered, an amendment that was secretly executed by the UNC on Friday September 4th 2015, the last working day before the September 7th, 2015 General Election, seventy-two (72) hours before the UNC was voted out of office. The amendment, an alteration to the contract, amongst other things, removed a critical termination clause from the standard FIDIC Yellow Book contract under which the project was being executed. This removal of clause 15.2(e) is what has exposed the people of Trinidad and Tobago to a huge potential liability to OAS. What it effectively did was effectively shift ownership and control of insurance bond money, belonging to the government, away from NIDCO and into the hands of the contractor.
There has been a recent decision delivered by a tribunal of arbitrators in a London Court of International Arbitration (LCIA), an arbitration matter between OAS and the National Development Company Limited (NIDCO). This arbitration surrounded the termination of OAS by NIDCO on July 6th. 2016. It is a fact that the removal of that specific termination clause from the contract between NIDCO and OAS on September 4, 2015 led to NIDCO’s loss of control and subsequently loss of the arbitration.
It is essential for me to provide a recap of certain matters for the population to appreciate how detrimental certain specific decisions which were taken leading up to September 4th. 2015 have been for us, the people of Trinidad and Tobago, and how on the other hand, the same generous decisions have consistently favoured OAS.
Madame Speaker, I refer to certain aspects of the previous Ministerial Statement delivered on April 1, 2016 as it shows how consistent we, the PNM, have been in our justified criticism of the decisions taken by the then UNC government, that favoured OAS, at the expense of the people of Trinidad and Tobago.
It is important to note Madam Speaker, that prior to the actual contract being negotiated and awarded to OAS, to construct the extension of the Solomon Hochoy Highway to Pt Fortin, certain peculiar developments took place that ought to be of interest to the citizens of this country. A few weeks after the UNC came into office and met this project on the table for award of a contract for continuation of construction, an interested group of known high level Brazilian executive of OAS, flew by Dassault private jet, from Rio de Janeiro Brazil to Durban in South Africa, in pursuit of the said contract. They then travelled by car to Johannesburg for the singular purpose of meeting a member of the Cabinet of Trinidad and Tobago, a Minister responsible and involved in the decision on this project. This secret meeting between the UNC Minister responsible for the project and the OAS took place at the Michael Angelo Towers in Johannesburg during the FIFA World Cup in South Africa.
No member of the UNC government has ever acknowledged that this meeting took place nor has any one of them ever attempted to explain what was the purpose and outcome of this trans-Atlantic secret meeting on the eve of an award of this multi-billion contract which was hurriedly wrapped up here in Trinidad, after the World Cup.
The process for the continuation of construction of this Highway was initiated by a previous PNM Government, through the invitation of tenders in early 2010. However, although tender submissions were received in April 2010, the contract was not awarded by the PNM prior to the May 24th. 2010 General Election since the bids received were significantly higher than the engineer’s estimate of TTD$3.6Billion.
However, on March 4th, 2011, the then government, through NIDCO, awarded a Design-Build Contract to OAS for the sum of approximately $5.2Billion, this was $1.6 billion more than the engineer’s estimate. This was the first salvo against the taxpayers; the award of an inflated contract to OAS.
This contract between NIDCO and OAS was governed by the FIDIC Yellow Book. One of the major benefits of utilising FIDIC terms and conditions is that, these terms and conditions are standard and internationally recognized. It is accepted that a party should only, with very good exceptional reason, amend the standard terms and conditions of FIDIC. However, despite this, the then UNC government immediately changed the standard advance payment term from 10% of the contract to 20%, which resulted in OAS, at the onset, instead of receiving TTD$428million, as the allowable mobilization advance, the company was facilitated with an inflated advance of approximately TT$ 856 million. Again, here was a decision taken that curiously favoured OAS and failed to protect the taxpayers.
Another major issue was that all payments made to OAS for activities under the Letter of Intent, which totaled TTD$236.4million, should have been deducted from the Advance Payment. However, these sums were not deducted. So, even before construction began, the former government, who are now the Opposition, loosely facilitated OAS with over $1Billion of taxpayers’ monies.
Madame Speaker, another noteworthy decision taken was that rather than utilising low interest rate funding from a multilateral lending agency, such as the IDB, for this multi-billion dollar infrastructure project, (the most expensive government infrastructure project ever undertaken in Trinidad and Tobago) the former government paid OAS, and others, via cash transfers from the Ministry of Finance, up to 2014, putting a strain on the country’s available cash. However, the benefit of this approach for the operators then was so that these curious excesses could have been engaged in without objection from any overseeing multi-national lender such as the World Bank, IDB or EU.
After all this, the fact is that OAS began to run into serious difficulties early in 2015. They wholescale defaulted on paying subcontractors and were late in paying workers. The writing was on the proverbial wall. There began to be increasing reports of OAS having financial difficulties from early 2015 to March 2015. On March 31, 2015 OAS filed a petition for judicial reorganization in Brazil whereby OAS sought bankruptcy protection. This is where the unforgiveable removal of condition 15.2(e) should never have happened as it should have been used to terminate OAS and thereby protect Trinidad and Tobago’s money under the bonds that were required to be in place, under the contract, expressly for any such eventuality.
Madame Speaker, on April 28, 2015 in response to OAS informing Dr Carson Charles of NIDCO that it had filed for judicial reorganization in Brazil, NIDCO wrote to OAS stating, inter alia, that,
“This action by OAS is sufficient for NIDCO as Employer under the contract to exercise its rights under Clause 15.2(e) of the Conditions of Contract to terminate the contract with immediate effect…”
NIDCO on April 28, 2015 acknowledged and informed OAS that it could terminate OAS using clause 15.2(e). Instead of doing that, we now know that, NIDCO then mysteriously and secretly proceeded to remove the offending, inconvenient clause.
So the question is, Madam Speaker, why did NIDCO weaken its own position by removing a clause that it knew permitted it to easily terminate OAS? Why did NIDCO during a period of March 2015 to September 4th, 2015 where OAS was obviously in serious financial difficulties not terminate the contract? Madame Speaker, had NIDCO exercised this right it would also have been able to immediately call upon all performance bonds and letters of credit without recourse by OAS. Despite this position of in-built strength, protected by the contract, the UNC government, through NIDCO, did chose during the period of March to September 2015 to
(1) reduce OAS’ scope of works
(2) keep the price of the contract firm notwithstanding
(3) remove clause 15.2(e) to allow the contractor to claim hundreds of millions of dollars of insurance money that was meant to protect the taxpayer interest in the project, almost a billion dollars of what should be taxpayers money.
Shockingly, once again, that government took action to favour the contractor to the detriment of Trinidad and Tobago.
By March 2015, the project was in dire difficulties and it would have been prudent for the former government to have pursued ways and means to terminate OAS to protect the public interest. Under FIDIC there are various ways to terminate, with varying degrees of complication and potential litigation. However, virtually all commercial contracts allow for automatic termination upon a party declaring bankruptcy or being under administration or judicial management/ reorganization. Under the FIDIC contract, the UNC government could have, and should have, immediately invoked Clause 15.2(e) and terminated OAS on the ground that it was subject to judicial reorganization. This is probably the simplest and least contentious form of termination under FIDIC and OAS would not have been able to make any justifiable claim against the Government for wrongful termination in any arbitration. Nonetheless, the stage was deliberately set for this, to give the contractor a fighting chance, knowing that no incoming government could have sat on its hands facing this stalled billion dollar project and not move, at some stage, to terminate the contract in order to proceed to restart the project.
Madame Speaker, it is noteworthy that the arbitration tribunal stated as follows,
“The Tribunal is in no doubt that the act of judicial reorganization triggered one or more of the elements of Clause 15.2(e)…”,
thereby confirming that this was a course of action open to the UNC government in March 2015.
However, it was on September 4, 2015, (the last working day before the general elections of September 7, 2015,) the UNC government, having not used this opportunity to terminate the contract in a clean, cost-effective and non-contentious manner, secretly entered into a written agreement with OAS called Contract Addendum No.2, whereby the government of Trinidad and Tobago gave up its right and ability to terminate the contract on the grounds of OAS being under judicial reorganization, a move that only favoured OAS. On September 4th, 2015 the UNC government, thus reaffirmed in writing, their desire to keep a company that was under bankruptcy proceedings/judicial reorganization in Brazil, as their preferred contractor for the Point Fortin Highway.
Despite the recent assertion of Dr. Carson Charles, the then CEO of NIDCO, that the removal of clause 15.2(e) was done on the advice of NIDCO’s engineer, no document has been found anywhere in NIDCO to support such a belated contention. To date no document has been found providing any advice that clause 15.2(e) should have been removed. No such announcement has ever been made by any of the actors engaged in this travesty. It remained a well-kept secret until we eventually found out what they had done. So why was it removed by the then UNC government? I also ask the media, and in particular, the Trinidad Express newspaper editorial writer, why hasn’t it asked those responsible why did they bend over backwards to protect OAS on the Friday before a general election instead of asking why this Government allowed NIDCO to terminate when termination was the obvious next step?
We terminated to give ourselves, the people of Trinidad and Tobago, a fair chance to get back money that was taken from us by a corrupt act of public dishonesty. The indelible and undisputed question remains, what was the benefit to be gained by the people of Trinidad and Tobago by erasing a clause to protect us from bankruptcy/judicial management when dealing with a contractor which has gone bankrupt or under/ judicial management as some of our friends prefer to call it. The question remains, why? Why the secrecy especially coming from people who now from the OPPOSITION benches want total openness and instant public accounting and public reporting on any and all events, sometimes even before they occur.
I have raised this question for seven years and never once was there any spokesperson of the UNC administration who saw it fit to respond, in any way. All we got was deathly silence. Yet, now we are hearing that it was a normal and wonderful act, then if so, why was it done secretly hours before you were on your way out? Who was the obvious beneficiary of that specific action, if not OAS? What did NIDCO (taxpayers) have to gain by giving up what they had in law and by contract to instead be fighting for it and winning it in court yet losing in an arbitration?
NIDCO eventually terminated OAS on July 6, 2016, fifteen months after the bankruptcy protection clause was triggered. In the period leading up to this termination, OAS had effectively and openly abandoned the project, it was selling off equipment, it had informed NIDCO that it was reducing its workforce, workers were protesting for unpaid wages, sub-contractors were claiming hundreds of millions of dollars from OAS, work was not taking place in any meaningful way and OAS and NIDCO had substantial disagreements as to monies being owed, delays and quality of work.
NIDCO terminated OAS based on the advice of the Engineer that OAS was unable to proceed with the works required by the contract. NIDCO immediately commenced drawing down the advance payment and performance securities in the total sum of US$139,572,877.62. It is irrefutable that had clause 15.2(e) not been removed, the termination of OAS would have been clean and simple on the basis that OAS was subject to judicial reorganization.
The drawing down on the advance payment and performance securities was met with resistance by some of the institutions that had issued them and by OAS. NIDCO pursued these matters in courts in various jurisdictions including England and was successful by order of the courts, including the Supreme Court of England and Wales. The recovery of these securities by NIDCO was permitted and in some cases was the result of Court orders. The Court even directed that the money recovered in the interim must only be used to carry on the project. Therefore, to suggest that it was an imprudent course to draw down on these securities is self-serving grasping at straws and running errands for the contractor.
This government always warned publicly, on many occasions, that whilst it recovered these securities and was using the money to continue the construction of the Highway, there was the possibility that if OAS was successful in the arbitration the sums gifted to them by the UNC may have to be repaid to OAS and the full extent of the curious action of amending the contract will come home to the people of Trinidad and Tobago. I myself have frequently made that assertion quite clear on many public platforms so it should come as no surprise to anyone who troubled him or herself to pay attention to what was done to us by the UNC government.
Sadly, this has now come to pass and the people of this country, are being made to give back the court approved $852 million dollars which the contractor could only have laid claim to only because some person/s in the last UNC administration took the perverted decision to amend a contract to once again favour a contractor at the expense of the public interest.
Madame Speaker, the arbitral tribunal ruled that NIDCO was wrong to terminate OAS and that it could not rely on clause 15.2(e) but this is being challenged by NIDCO via an application to the High Court of Trinidad and Tobago. Effectively, NIDCO is “appealing” the arbitration award.”
In the meantime, given the facts and complexities as stated here today and for the last seven years, it is our view that the public needs to know
1) By what process, advice and documentation was it determined that the billion dollar contract must be amended to grant an $852million waiver to OAS?
2) Who authorized the amendment of the contract?
3) What was the specific purpose and benefit to be had?
4) Who actually carried out the instructions?
5) What was the role of the Ministry of Works and Transport, the Board of NIDCO, the Consultant and the Management in effecting the amendment and its consequential waiver?
It is against this background that Cabinet has asked the Attorney General to examine and amend the terms of reference of the Sebastian Ventour Enquiry with a view to adding to that examination the specific concerns raised here today and find the answers to these troubling questions.
In conclusion, the question still remains, unanswered, why clause 15.2(e) was removed by Contract Addendum No.2, on the Friday before the general election of 2015 and to ask why did my government terminate OAS knowing that clause 15.2(e) had been removed is to completely ignore the dire circumstances that existed with respect to a contractor that was not performing its obligations and that was in judicial reorganization and who is now to benefit from a secret deal engineered and executed by public officials who cheer at the contractors good fortune without a care for their own questionable conduct. It needs to be re-emphasized that the money being taken back by the arbitration was not lost by the termination of the contract, it was given up by the loss of the clause that was removed. We had it but the UNC voluntarily gave it up to the contractor. This PNM government tried to get it back. We succeeded for a while but now it appears that it might be lost permanently.
I maintain that my government has sought to protect the public’s interest in this matter and just as we fought and won the right to spend, on the highway, all the money we recovered from the bond ownership we will take additional steps to ensure that the San Fernando to Point Fortin highway is completed and the facts, disturbing as they be, are made known to all the people of Trinidad and Tobago.
Madam Speaker I thank you.