Errant logging company gets injunction against GFC to avoid closure

Aug 11, 2016 News

– Despite heavy indebtedness to Commission
Even though it is in violation of the very agreement it wishes to have enforced, Demerara Timbers Limited (DTL) has moved to the courts to stop the Guyana Forestry Commission (GFC) from putting an end to its operations.
A source close to the GFC explained that the company filed an injunction last month after it realized that the Commission was about to take action against it.
In 1991, the then government signed a lease agreement with DTL. The company was given two lease agreements which are called Timber Sales Agreements (TSA).
The two TSAs were to be valid for 25 years. However, the contract carried a clause making provisions for a renewal. The renewal provided for, can last a further period not exceeding 25 years. However, Kaieteur News understands that this clause is to be enforced only if DTL conformed with the terms and agreements of TSA.
Those terms included a requirement for DTL to give US$3M to the government as part as an investment agreement.
The logging company was also required to comply with several other terms of the TSAs.
Important terms of the TSAs included a requirement for the company to work the given concessions to the satisfaction of the Commission. This, Kaieteur News understands, is catered for in Clause Six of the agreement. Working the concession to the satisfaction of the Commission is tied to the annual operational plan that is supposed to be submitted to GFC.
The plan is supposed to take into consideration the allowed amount of logging permitted as well as the company’s target for the year ahead.
Kaieteur News was told that DTL would have submitted a plan, and the Annual Allowable Cut approved by the GFC was 47,000 cubic metres for one TSA and 15,000 cubic metres for the other.
However, over the last 10 to 12 years, the logging company has been failing to meet those targets. For some years, production has been as low as five percent. The company has been basically under-producing.
Further, DTL was supposed to pay annually a minimum royalty and acreage fee to the Commission. This also forms part of its obligations under the TSA.
However, over the last seven years, the company has been failing to pay this amount in full.
In fact, resulting from its failure to pay in full, the company is now indebted to the Commission in excess of $26M.
Despite all its violations, DTL wrote GFC last year seeking clarification on whether the 25-year renewal mentioned in the contract would be automatic.
Kaieteur News understands that the company was told that the GFC has serious issues with its production and indebtedness, so the extension may not be possible.
Because of this, the company threatened a lawsuit to say that GFC is in violation of the contract. It then filed for an injunction barring GFC from stopping its operations.
The company was granted the injunction.
Meanwhile, GFC says that the fact that the company approached the court represents a clear violation. It cited a clause in the TSA.
Clause 25 of the TSA states, if there is any dispute arising out of the agreement the two parties are to head to International Centre for Settlement of Investment Disputes. So going to the local court breaches the agreement.
Interestingly, one of the TSAs has already expired. It expired in June. So DTL is not supposed to be operating.
GFC is now mulling going after DTL in a lawsuit for outstanding monies. The Commission’s position is that if DTL is going to insist on the automatic right of renewal then, at some point, the company will have to make things right financially with GFC.
Officials at GFC are at a loss, saying that they cannot understand the audacity of the errant company.
In 1991 when the government signed the TSA, the company was under different owners. The owner of DTL at that time was Demerara Holdings MV. That company was registered in the Cayman Islands. Subsequent to the signing of the agreement, DTL sold to Prime Group Investments which remains the owner of the company. Kaieteur News understands that Prime Group Investment is another foreign company.
One GFC Official said, “They (DTL) inherited a lot of the benefits, failed to keep up with their end of the bargain, but want to enforce the benefits against us.”
GFC’s position is that no renewal can be absolute if the company has not complied with the terms of the agreement.
This publication was told that before the transfer of ownership, production was relatively good. Things started to change since the transfer but got worse and continued to go “downhill” in 2005. By 2005, GFC’s tracking system had already evolved and the Commission begun keeping tabs on the company.
A source in GFC said that the highest production over the years was between 30 – 35 percent.

1 thoughts on “Errant logging company gets injunction against GFC to avoid closure”

Gtloyal August 11, 2016 at 8:43 am

So, according to this, the automatic renewals continues, the company don’t have to pay but practically becomes the owner of the land instead for time indefinite and the government can’t say a thing about it.
If they are in violation cancel the whole contract. Forget about alienating investors. They are not investors. If they were they would have been producing and paying their bills.