The Trinidad-based Caribbean Court of Justice (CCJ) says the legislation regulating the importation of liquified petroleum gas (LPG) is constitutional and that the Belize government is under no obligation to pay compensation to gas companies whose businesses had been adversely affected by the legislation.
The ruling followed an appeal filed by the Controller of Supplies and the Belize government with the respondents being Gas Tomza Limited, Western Gas Company Limited, Southern Choice Butane Limed and Belize Western Energy Limited. LPG is widely used for a variety of purposes in Belize. It was sourced from the United States Gulf Coast to suppliers across Central America and then imported by land into Belize by each of the gas companies for distribution. Together, they controlled the importation of LPG into Belize for over 20 years.
But the government embarked on the National Liquefied Petroleum Gas Project (NLPG)with the goals of ensuring the stability, quality, and affordability of the LPG supply, the creation of climate resilient infrastructure for LPG, the minimisation of smuggling of LPG, and the protection of the health and safety of Belizeans.
The National Gas Company (NGC) was created to drive the NLPG project, resulting in a definitive agreement between the government and NGC which contemplated the importation of LPG wholly by sea and the construction of supporting infrastructure for importation, distribution and supply of LPG throughout Belize.
Subsequently, the National Liquefied Petroleum Gas Project Act was enacted to give effect to the definitive agreement.
The Original Act introduced a regime whereby LPG would be exclusively imported by NGC into Belize by sea from the United States Gulf Coast, undergo quality assurance and other testing and stored at the NGC facility.
It also also exempted NGC from obligations relating to the payment of income and business taxes, sales taxes, customs and excise duties, stamp duties, environmental taxes, and others.
But the legislation was challenged by the gas companies, arguing that the Original Act significantly affected their business, resulting in the loss of a large portion of their customer base.
The gas companies initiated a claim in the High Court of Belize, arguing that the Original Act violated their constitutional right to property, right to work, protection of freedom of association, and right to equality before the law.
But before the the adjudication of the claim was completed by the courts, the Original Act was amended, making the importation of LPG by other companies possible.
The gas companies claimed that the law acquired their property without compensation, namely the goodwill of their respective businesses.
The High Court ruled that their right to property was breached and dismissed the other claims. The Court of Appeal upheld the finding of a breach of the right to property but also found that there was a breach of the gas companies’ right to work.
Both parties to the litigation appealed to the CCJ, the country’s highest and final court.
At the hearing of the appeal, the gas companies abandoned the ground of the cross-appeal that the Original Act was void and that the amendments made thereto were a nullity.
The remaining issues for the CCJ’s determination concerned the degree of judicial deference owed to the legislature in relation to legislation of a socio-economic nature, as well as whether the amended legislation contravened the gas companies’ rights to property, work, freedom of association and equality before the law.
Depending upon its determination of these issues, the CCJ would determine whether the matter should be remitted to the High Court for assessment of damages and whether there should be an award of vindicatory damages.
In its majority ruling read out by the CCJ president, Justice Winston Anderson, he affirmed that while the legislature should be afforded a generous margin of appreciation to shape socio-economic policy, courts must remain the ultimate guardians of constitutional rights.
He said the presumption of constitutionality remains a core feature in deciding on the intensity of review of socio- economic legislative policy as well as in the application of the de Freitas test for measuring proportionality.
Regarding the breach of the right to property, Justice Anderson accepted there could be an explicit or direct taking of property or a regulatory or indirect taking of property under section 17 of the Belize Constitution.
He found that there had been no explicit or direct taking of goodwill and went on to consider whether the Amended Act was regulatory and had effected an indirect taking by being a substantial and disproportionate interference with the goodwill of the gas companies.
On the facts of the case, he held that the gas companies failed to adequately plead or prove the existence and loss of goodwill in their businesses and hence that the claim that there had been a taking was bound to fail.
In particular, Justice Anderson determined that the gas companies’ undoubted loss of market share could not wholly or necessarily be attributable to a loss of goodwill without provision of expert evidence which had not been forthcoming.
On the right to work, the majority of the five-panel of judges, found that the constitutional right to work guarantees the opportunity to engage in a trade or business and that this right may be extended to corporations.
However, it was held that there was no breach of this right as the Gas Companies retained the ability to, and did in fact, continue to operate their LPG businesses. They had not been denied the opportunity to work, even if the conditions for importation had changed.
But in the dissenting opinion read out by Justice Peter Jamadar, it was found that the constitutional rights of the gas companies were breached relating to their right to property and their right to work.
Justice Jamadar examined the notion of the presumption of constitutionality and compared its usefulness as a burden of proof and a canon of construction in interpreting constitutional provisions.
In socio- economic policy making legislation or executive actions, the Court is, through the separation of powers, the final arbiter of whether constitutional standards have been met.
Further, he emphasised that in proving that a constitutional infringement has occurred there is a two-stage test to be applied: (i) a claimant must prove that prima facie their right has been, is being, or is likely to be infringed, and, once this has been established (ii) the burden shifts to the State to establish that the limitation on the right is, among other things, justified.
The more substantial the interference, the greater the obligation on the State to provide a cogent justification and fulsome disclosure.
In examining whether the gas companies’ rights were contravened under the Constitution, Justice Jamadar considered that both lower courts concluded that the goodwill of the Gas Companies was lost because of the monopoly created by the Original Act and continued by the provisions of the Amended Act.
The result of the Original Act was an immediate loss of business, customer base and goodwill. This amounted to a deprivation and/ or taking of property, due to the adverse effects of the interference, the judge said.
The CCJ said that considering the public importance and complexity of the matter, and its finding that the gas companies acted reasonably, it ordered each party to bear their own legal costs.