Recently the media published the decision of the Caribbean Court of Justice (CCJ) on the case brought by policyholders of British American Insurance Company (BAICO) against the State of Trinidad and Tobago in regard to the Government’s bailout of policyholders of CL Financial and its subsidiaries.
The case—Richards and Others v the State of Trinidad and Tobago (Application No AGOJ2021/001)—sought to hold the Government of Trinidad and Tobago (“the GORTT”) responsible for compensating policyholders in the Eastern Caribbean.
At the time of its collapse in early 2009, it is estimated that CL Financial, a Trinidad-based financial conglomerate, operated 65 subsidiaries in 32 countries worldwide, with total assets estimated at TT$100 billion. All Caricom countries, with the exception of Haiti and Jamaica, were negatively impacted by the financial crisis.
In January 2009, CL Financial, the parent company, approached the Government of Trinidad and Tobago for liquidity support. The GORTT took the decision to bail out the domestic subsidiaries—CLICO Investment Bank (CIB), Colonial Life Insurance Co (Trinidad) Ltd (CLICO) and British American Insurance Company (BAT). In addition, the GORTT provided relief to affected policyholders of the Trinidad-based companies.
Although the failure of CL Financial and its subsidiaries reverberated across the Caribbean, the bailout was not extended to businesses that were not domiciled in Trinidad and Tobago.
The situation was compounded by the inability of Caricom governments to arrive at a coordinated solution to the financial crisis and its consequences. The uncoordinated approach led to the differential treatment of policyholders in the Community. As a result, affected persons in some territories were fully compensated for their losses, while the claims of policyholders in other territories remain outstanding.
Insurance operations in the Eastern Caribbean were provided through two companies—BAICO and CLICO Barbados; BAICO, a subsidiary which was incorporated in The Bahamas in 1920 but its operations were managed through BAT, the Trinidad company.
In addition to BAICO, CLICO Barbados, a company incorporated in Barbados, provided insurance services to the eight member countries of the Eastern Caribbean Currency Union (ECCU). Policyholders in BAICO and CLICO Barbados also suffered devastating losses. However, the Eastern Caribbean governments were not able to provide relief to policyholders because of limited fiscal space and the inability to acquire and liquidate the assets of BAICO.
The GORTT has only been able to disburse US$40 million of the US$100 million promised to policyholders in the Eastern Caribbean.
The claimants in the case, Richards and Others v the State of Trinidad and Tobago, alleged the GORTT had breached Articles 7, 36, 37, 38 and 184(1)(j) of the Revised Treaty of Chaguaramas.
Specifically, they claimed the GORTT had breached Article 7, which prohibits discrimination on the grounds of nationality; and Articles 36 to 38, which prevent member states from imposing new restrictions on the cross-border provision of services, require them to remove restrictions on the provision of services (Article 37), and remove restrictions on banking, insurance, and other financial services (Article 38).
The claimants also argued the Government’s actions were in breach of Article 184(1)(j), which requires member states to adopt measures to protect the interests of consumers in the Community, including mechanism for effective redress.
The CCJ, in its ruling of October 2024, dismissed all claims. The learned judges rightfully pronounced in favour of the Government of Trinidad and Tobago. The judges acknowledged that Article 30(2) of the Revised Treaty provides an exception which allows a state to pursue activities in the exercise of its governmental authority to protect the interests of its citizens.
The CCJ’s decision in favour of the GORTT is no cause for celebration, as it lays bare the lack of progress of the regional integration experiment.
It also highlights the failure of Caricom governments to develop an effective legal, regulatory and institutional framework to resolve distressed financial institutions that operate in several Caricom jurisdictions.
Equally concerning are the gaps in the legal and regulatory framework to protect Caricom consumers and promote public trust and market confidence.
The collapse of CL Financial represented regulatory failure in all the affected countries at the national and regional levels with regard to the oversight of insurance companies.
Given the presence of large financial institutions in the region, Caricom governments should act expeditiously to put in place the necessary treaties, laws, regulations and institutional arrangements at the national and regional levels to forestall another regional financial crisis.
Some of the key reforms include better oversight and effective regulation of systemically important entities, the implementation of regional frameworks for crisis management and bank resolution, deposit insurance and investor protection.
Finally the efficient functioning of the Caricom Single Market and Economy must be under-girded by a robust regional regime for consumer protection.
Cecila Melville
Trincity