Home' Trinidad and Tobago Guardian : July 4th 2013 Contents JULY 2013 • WEEK ONE www.guardian.co.tt BUSINESS GUARDIAN
COMMENTARY | BG11
over TSTT, NFM and Tringen. Far from it. The rationale behind
the creation of NEL was for the State to maintain control over
TSTT, NFM and Tringen---plus minority holdings in Phoenix
Park Gas Processors and Atlantic LNG Train 1---by transferring
the shares in these five companies into an investment holding
company, which could then facilitate investment by T&T individuals
The idea was to create an opportunity for the population to
own shares in the commanding heights of the economy while
at the same time retaining control of the telecommunications
backbone, two profitable ammonia plants, a flour miller as well
as shares in Atlantic LNG and Phoenix Park Gas Processors.
To repeat for emphasis, the State DID NOT "divest itself of
its shareholdings in NFM, Tringen and TSTT" and however the
Court of Appeal arrived at that conclusion, it did so in error.
What the State did was transfer its shares in NFM, Tringen and
TSTT to a company it controls, which attorneys representing
TSTT really ought to have known.
The Court of Appeal, therefore, misdirected itself when it con-
cluded that "NEL and not the Government is now the holder
of the 51 per cent shareholding in TSTT" as TSTT is clearly a
company "in which the State has a controlling interest."
The Court of Appeal may have erred on this important point
because it may have been too quick to discount the test of direct
and indirect control as being "not an appropriate one to be applied
to the Integrity Act and sections 138 and 139 of the Constitution"
because it is "too wide and produces an unintended consequence
as well as too much vagueness in the application of the Integrity
Act to the members of the board of state enterprises."
Assistance from Constitution
The High Court judge had sought the assistance of Section
119 (9) of the Constitution, which referred to the State "exercising
control directly or indirectly" to assist her in defining what is
a state enterprise.
The 2013 budget document, State Enterprises Investment Pro-
gramme, identifies 56 companies that are defined as state enter-
Of those 56 companies, 45 are wholly owned, seven are majority
owned and four are considered to be state enterprises even though
the State owns less than 50 per cent of the shareholding of the
Of the seven majority-owned companies, Alutrint must be
discounted as the Government cancelled the contract with the
Chinese shortly after it came to power. The six majority owned
companies are: ADB---97.2 per cent, Business Development Com-
pany---64.4 per cent; NEL; Plipdeco---51 per cent; CAL 84 per
cent and National Helicopter Services---82.3 per cent.
The four minority-owned companies that are considered to
be state enterprises are:
• DFL Caribbean Holdings Ltd---28.1 per cent Government;
38.8 per cent International Financial Institution; 33.1 per cent
• TT Mortgage Finance---49 per cent Government; 51 per cent
• Metal Industries Company Ltd---46.7 per cent Government;
14.9 per cent DFL; 38.4 per cent other
• LIAT---2.9 per cent Government; 29.2 per cent BWIA; 26.6
per cent regional governments (one doubts the accuracy of BWIA's
shareholding in LIAT)
Given the small number of companies over which the State
exercises indirect control, can the argument about the test of
direct or indirect control being too wide be sustained?
The Court of Appeal seems to agree with TSTT that the judge
of first instance was wrong to resort to section 119 (9).
One of the reasons for the Court of Appeal opting to reject
119 (9) as an aid to interpretation is that if Parliament had intended
the section to apply to the Integrity provisions, Parliament would
have done so, as it did with sections 116 (3) and 119 (8). But it
seems to me that all 119 (9) does is define a state enterprise for
the purposes of subsection 119 (8) and 116 (3).
In refusing section 119 (9)'s offer of assistance, the Court of
Appeal does the clause the additional discourtesy of misreading
her.In his judgment, Justice of Appeal Smith quotes section 119
(9) thus: "For the purposes of subsection 8 and section 116 (3)
an enterprises shall be taken to be controlled by the State if the
Government..." (exercises control etc). The sentence actually
reads "...an enterprise shall be taken to be controlled by the
State if the Government or any body controlled by the Govern-
In my view, the omission of the seven words "or any body
controlled by the State" by the Justice of Appeal, throws an
entirely different light on how a state enterprise is to be defined.
Inclusion of the seven words allows the Government to exercise
control over a state enterprise by way of another
company/entity/enterprise that the State controls. In other words,
it allows for the State exercising its control indirectly as well as
And indeed, the Government exercises its control over TSTT
through NEL, as it exercises its control of Tringen through NEL
and as it exercises its control of NFM through NEL.
One of the three reasons the Court of Appeal chose to apply
the de jure or legal test of control as its "first guide" (rather than
the de facto or factual test of control) was because section 119
(9) only subjects an enterprise to the Auditor General, while the
Integrity provisions directly affect individuals and expose them
to "onerous person duties."
(It is noted, with absolutely no comment, that the appeal court
judge uses negative phrases such as "onerous duties," "heavy
duties" or "heavy burdens" on six occasions in this short judgment
to describe the requirement to file the annual Integrity returns.)
In its arguments, the Integrity Commission's attorneys suggested
that "resort may be had to the de facto or factual control test
in cases where for instance the de jure test is being used as a
ruse to evade the statute," (page 10 of the judgment).
The Court of Appeal argued that "given the uncontested evi-
dence, there are no exceptional circumstances here which call
for the application of the de facto or factual test to be applied."
I take this to mean that it did not occur to the Justice of Appeal
that the mere fact that TSTT sought an interpretation of whether
it was a company "in which the State has a controlling interest,"
may have been indicative of an attempt by its directors to escape
the Integrity provisions.
If, as the learned judge argued, "it is at least very arguable that
the Government can exercise control indirectly over TSTT by
the use of its majority shareholding in NEL," could Prime Minister
Kamla Persad-Bissessar have announced on October 7, 2010 that
former police commissioner Everald Snaggs would be the new
chairman of TSTT?
The announcement by the Prime Minister followed a lengthy
Cabinet session where over 300 nationals were approved for
appointments to 38 state boards, statutory bodies and regional
health authorities, according to a story by Guardian political
reporter, Gail Alexander.
Could the Prime Minister have announced the new TSTT
chairman---along with four other government-appointed TSTT
directors---if the Government did not "exercise control indirectly
over TSTT by the use of its majority shareholding in NEL?"
For all intents and purposes, NEL is the Government and TSTT
is simply a state enterprise that is controlled by another state
enterprise (NEL), which is an investment holding company for
As then Minister of Finance, Brian Kuei Tung said of NEL
when he delivered the 2001 budget: "Through this mechanism
the public and especially the employees of the enterprises concerned
could participate in ownership and build assets."
And as then Minister of Finance, Gerald Yetming, added when
he delivered the 2002 budget on September 14, 2001: "This ini-
tiative would allow our citizens to share in the wealth of some
of our most profitable enterprises."
What about CL Financial?
Were Mr Kuei Tung and Mr Yetming---the current chairman
of CL Financial, Clico, Angostura and Home Construction Ltd---
wrong about NEL?
And on the issue of Mr Yetming, if a state enterprise is defined
as companies "in which the State has a controlling interest," can
it not be argued that the shareholders' agreement between the
Government and CL Financial makes the group once controlled
by Lawrence Duprey a state enterprise for the life of the agree-
Is the deciding factor the fact that the shareholders' agreement
entitles the State to appoint a majority of the CL Financial
directors? Even though the State does not own one share in CL
Financial, does the fact that four of the seven directors are
appointed by the Government not make CL Financial a state
And if TSTT is not a state enterprise, subject to the political
control of Cabinet, why did Sam Martin submit his resignation
as the chairman of TSTT on June 23, 2010, one month after the
2010 general election?
In fact, if TSTT is not a state enterprise, would the Cabinet,
meeting on November 3, 2005, have been able to appoint Mr
Martin as chairman, while disappointing Christian Mouttet, with
absolutely no reference to NEL.
If TSTT is not a state enterprise, Cable & Wireless would be
justified in negotiating exclusively with NEL to sell its 49 per
cent stake in TSTT, rather than having to negotiate with the
Minister of Public Utilities and the Minister of Finance.
The judgment of the Court of Appeal also has serious impli-
cations for the Government's control of the state enterprise sector
as, if TSTT is not a state enterprise, neither are Phoenix Park
Gas Processors, Tringen or NFM, which are also controlled by
Phoenix Park is 20 per cent owned by NEL and 31 per cent
owned by NGC. Fifty-one per cent of Tringen, like TSTT, is
owned by NEL, while 49 per cent is owned by a foreign company,
Yara. NFM is 51 per cent owned by NEL and 49 per cent owned
by local individuals and institutions.
And if TSTT is not a state enterprise, can Trinidad & Tobago
Mortgage Finance (TTMF) and the Home Mortgage Bank---which
are both 51 per cent owned by the NIB and which both serve
public purposes---be defined as state enterprises?
It is interesting that TTMF in included in the State Enterprises
Investment Programme document referred to earlier, but HMB
Does the fact that the Government's own document not
consider HMB to be a state enterprise cast any doubt on the
proposed merger of HMB and TTMF and the initial public offering
of shares in the merged entity?
Indeed, is the NIB itself a state enterprise?
The NIB was established by an Act of Parliament. It serves
a public purpose. Its accounts are audited by the Auditor General
and it is subject to the Public Accounts Committee. The NIB
board comprises 11 directors, three each from government, business
and labour, the executive director who is an ex-officio member
of the board and an independent chairman (Calder Hart was
once its chairman).
If control by the State, either directly or indirectly, is crucial
to the definition of a state enterprise, then it is clear that NIB
is not controlled by the State and therefore is not a State body.
One hopes that the Government appreciates the slippery slope
that the Court of Appeal judgment presents for the definition
of state enterprises and that the State acts appropriately by
directing that the judgment be appealed to the Privy Council.
It seems to me that if the judgment is allowed to stand, it sets
a precedent for the definition of state enterprises for the purposes
of the Integrity provisions and it can then be argued that TSTT,
Tringen and NFM (and other companies) are not state enterprises
for other purposes.
This could result in ostensibly state-owned companies arguing
that they do not need to subscribe to the Auditor General, the
Public Accounts (Enterprises) Committee, guidance from the
Chief Personnel Officer or directions from the line minister.
Is that what the country wants?
State did not give up control of TSTT
Continued from page 3
Justice of Appeal Allan Mendonca
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