Already facing three lawsuits from Clico policyholders who want the Government to honour the debt owed to them for their investments in the Executive Flexible Premium Annuity (EFPA), the Government is facing a new headache-an arbitration threat from the German minority shareholders of MHTL (Methanol Holdings Trinidad Ltd). At the heart of the contention by the German shareholders of MHTL, whose interest in the billion-dollar company is held in a company called Consolidated Energy, is the allegation that the Government transferred the 6.54 per cent of Methanol Holdings (Trinidad) Ltd held by CL Financial to Clico on September 16, 2009.
The transfer of those shares to Clico gave the insurance company a 56.53 per cent stake in the methanol company-and a majority position in MHTL. KfW, the German financiers of MHTL and Consolidated Energy-comprising German companies Proman, Helm and Ferrostaal-are claiming that the transfer of the shares from CL Financial to Clico is in breach of the loan, security and shareholder agreements by which MHTL was established and operates. They are claiming, in particular, that the transfer of the majority stake in MHTL to Clico does not respect Consolidated Energy's rights of pre-emption-which means that if CL Financial were going to transfer the shares, it should have offered them to the German minority shareholders first.
Those German minority shareholders are also claiming that the MHTL shareholders agreed that it would not sell or transfer its shares in MHTL unless it had obtained KfW's written consent. In the request for arbitration, Consolidated Energy wrote: "The import of these provisions is that they make clear that the pre-emptive purchase rights provision in the Shareholder Agreement 'was designed to protect the desire of each of the joint owners that it should not be forced into joint ownership with another party against its will.'" The minority shareholders of MHTL are also alleging that the Government, Clico and CL Financial "continuously misrepresented to KfW and Consolidated Energy that there had not been, and would not be, any change in ownership either direct, beneficial or by impairment of Clico/CL Financial's shares in MHTL without respecting Consolidated Energy's rights of pre-emption and seeking KfW's approval."
And they claim that in a statement to Parliament on February 25, 2011, Minister of Energy Carolyn Seepersad-Bachan "announced the nationalisation of Clico and by extension of MHTL." That statement referred to the establishment of AUM II, a US$1.9 billion extension of AUM I, which is a complex of seven plants producing melamine, urea and ammonium sulphate. The Seepersad-Bachan statement makes no reference to nationalisation, but says that Clico's shareholding in MHTL amounts to 56.53 per cent. The Minister of Energy added: "Cabinet has therefore mandated that the dividend income on the shareholdings of Clico in MHTL be assigned to meet Clico's debt.
"In addition, given that 21.52 per cent of MHTL shares are currently in the statutory fund, the Minister of Finance will admit the additional shares of 35.01 per cent of MHTL's shareholding to the statutory fund, resulting in 100 per cent Clico's shareholding in MHTL being held in the statutory fund." This means that if the German minority shareholders are successful in their arbitration, the EFPA policyholders of Clico will be placed at a significant disadvantage as MHTL is the single largest and most valuable asset held by Clico.
Contacted for comment, Clico chairman Gerald Yetming said: "We have not been officially served with an arbitration notice by the International Court of Arbitration. "On the basis of the advance copy of the arbitration submission that was sent to us by Consolidated Energy, the matter is being looked at by our attorneys.
"We have been in communication with Consolidated Energy and they have agreed that we should meet."
Sources close to MHTL told the Guardian last night that the first time the Government was aware that the German minority shareholders of MHTL felt there was a disagreement was when they received arbitration documents. Those sources said the MHTL Shareholder Agreement provided that if there was a disagreement, that there should be direct negotiations before any referral for arbitration.