Expropriation - Democracy's Cardinal Sin

Executive Summary

For an Island with reported debts of over US $2billion dollars and tourism offering possible salvation, Antigua's expropriation of Half Moon Bay Resort gives no comfort to prospective foreign investors and the international community.

Though the illegal expropriation was committed by the former administration, the new UPP Government has been slow to meet its pre-election promises to abandon the forced acquisition of the US-owned property and return it unencumbered to its rightful owners.

Conventionally, expropriation is for public use to enable the building of important infrastructure such as roads, bridges and airports. It is not a State mechanism to transfer assets to another private entity. Such was the action of the former Lester Bird-led Antigua & Barbuda administration, which claimed in the country's Parliament to have secured the blessing of the International Monetary Fund.

Article

Expropriation is the forced acquisition of private property by the State. Normally, this form of action is for public use to enable the building of important infrastructure such as roads, bridges and airports. It is an instrument which must be used with extreme caution and circumspection for it deals with the cornerstone of all democracies - the Government's constitutional duty to respect and protect an individual's right to ownership and enjoyment of private property.

In Antigua, the Half Moon Bay Resort has been owned by H.M.B. Holdings Limited since 1971. For twenty five of those years from 1971 -1975, the Company developed, maintained and managed its property, building an enviable reputation for service and business practice.

The Hotel sits on a white coral sand beach, consistently ranked amongst the top ten in the world. Included in the Resort's 108 acres are a private 9-hole golf course, complex of tennis courts and miscellaneous guest amenities, private estates and additional land earmarked for further villas and guest accommodation.

Half Moon Bay Resort has made significant contributions to Antigua's economy and international profile. The guest roster and the number of repeat guests provide valuable testament to its reputation.

Over the years, many offers to purchase the property have been made to its owners from private sources claiming to have been directed by the Government but none was accepted as the owners' sole interest was to maintain standards and develop their asset. That goal is still unanimously supported by the shareholders. A dozen individual shareholders, all citizens of the United States, currently own the Company.

In September of 1995, Hurricane Luis arrived on Antigua at Half Moon Bay. The property was demolished. The Hotel was insured but the insurance proceeds were pledged against a small loan from Barclays Bank Plc. It emerged that Caribbean Hotel Management Services, the hotel management company responsible for hotel operations had failed to properly insure the property for full replacement value in accordance with its terms of engagement. The Bank collected the modest insurance funds to repay part of the outstanding loan.

The owners began to look for replacement funding. Meanwhile, members of the Kluge/Querard family, who together hold a majority of Company shares, provided loans to the Company to commence re-development, secure the property and ensure its survival.

However, the Government of Antigua & Barbuda has turned this survival into a severe challenge.

Initially, Prime Minister Lester Bird offered to broker a sale of the property to "a friend of the Government". The owners responded by declining this offer and stating their intention to rebuild and redevelop.

Sabotage and harassment by the former Administration began immediately. Re-financing attempts were repeatedly undermined. An initial attempt at sequestration of the property was made and rebuffed in 2000.

Between December 2001 and February 2002 two more attempts followed. Announcements carried by the press...