The Judiciary is not about economics

If this latter request is approved by the court then the company will be wound up and its assets disposed of. The Appeal Court overturned the initial decision of Justice Ramcharan (apparently he erred in law), so much so that the company was seen as insolvent; its assets appeared to be less than its liabilities and hence should not have been operating — a misinterpretation of business finance.

This situation reminds me of two other court decisions.

One was the Industrial Court deciding that a union, its members, must be paid their traditional salary increases although the company’s balance sheet demonstrated that it was incapable of such payments.

The esteemed judge concluded that the company’s straitened economic situation bore no relationship to its requirement to pay salary increases.

The other was the decision against the NAR ’s intention to cut emoluments to the Public Service when the country, the government, was in the midst of a massive recession with government’s revenue severely reduced. The court’s decision was that such emoluments were the property of the Public Service employees, hence it was illegal to deprive them of access to their property.

The upshot in part of this in the face of reduced income to the government was that we entered the arms of the “twin dragons” with standby arrangements from the IMF and various conditionalities, some of which included the sale of the Pt Lisas companies.

Surely, our eminent judicial people were correct in law. However, their decisions at best represented tunnel vision and were wrong in economics, even retrograde. Still, the Judiciary is not there to drive or facilitate economic development of the country. It is not there to be economically innovative, to understand or allow this to influence its decisions.

This is particularly so in the case of the decision on CLF’s situation — if a company is insolvent it should not be operating. The fact that such a local company became a global conglomerate, earning foreign exchange — the life blood of our economy — and was the victim of externalities, one which should be reconfigured and supported by local resources until it regained its feet, could not form part of the judicial considerations.

The Judiciary is not about the economics, it operates within the narrow confines of the law. Hence the villain of the piece, as I said in a previous comment, was not the courts but the un-entrepreneurial governments involved.

Following the global economic collapse in 2008-09 (drop in prices of oil and gas, and the sub-prime mortgage debacle) CLF needed cash flow support as did other companies in other countries. Our government gave some support and in particular protected the special investments of the public in the conglomerate via small payouts and long-term bonds. But, unfortunately, removed the team that had built this major business conglomerate.

The intent of the government over the years appears to be the protection of these public investors, sale of assets to repay some spending on the bailout and a shareholder’s agreement which in practice made the government a substantial shareholder of the company. It was never the intention of successive governments to use their resources to relaunch the conglomerate unto the global market to earn foreign exchange.

The latest move of the Government to appoint provisional liquidators to preserve the assets of CLF pending the outcome of the substantive action to liquidate the company to repay bailout debts, demonstrates conclusively that restoring the company to its former glory was not in the bailout plan.

The other shareholders of CLF claim that foreign investors are waiting in the wings to buy into the company which will allow the repayment of the bailout debts and restore the company to its pre-global- economic collapse position.

If this were to come about the Government would receive all of its money now, including that which it has committed itself to paying by long-term bonds to the public (so giving it really some extra cash in hand and foreign exchange in the short term). But some ownership of the company would pass to foreign investors, the same forced error that was made in the sale of the Pt Lisas plants.

Economic development is not about the sale of economic generators but about providing exporting companies, those that earn foreign exchange, owned by locals to ensure economic sustainability.

There is some talk that it is the poor taxpayer who is supporting the bigshot owners of CLF. Of course, the repaid money as TT dollars and even US dollars can be put back into the economy. One will increase liquidity, the other will support consumable imports, both at the expense of the demise of an economic generator. It is worth noting that the TT dollar derives its value from our ability to export, ie, its ability, via export earnings to purchase imports. Unlike many l a r g - er and devel - o p e d c ou n - tries we import v i r t u - ally all that we c o n - sume.