INFORMATION MINISTER Daryl Vaz says the Government is now faced with an unbudgeted payment to the Ezroy Millwood-led National Transport Co-operative Society (NTCS).

The cash-strapped Jamaica Labour Party administration was yesterday dealt a severe blow by the United Kingdom-based Privy Council's ruling in favour of the NTCS following a bitter arbitration dispute.

The NTCS is likely to be awarded more than $1 billion plus interest after it won its appeal at the Privy Council against the Government.

Vaz told The Gleaner yesterday that the Attorney General's Department was now reviewing the Privy Council's ruling.

He described the arrange-ment between the previous People's National Party government and the NTCS as a bad decision.

The Privy Council's decision comes at a time when the administration is struggling to stay afloat amid a massive shortfall in revenue and a moving deadline in signing an agreement with the International Monetary Fund for balance-of-payment support.

In handing down its decision yesterday, the Privy Council sent the case back to the Court of Appeal for it to consider the amount of money to be paid to the NTCS.

Legal costs

The arbitration award to the NTCS of $4.5 billion with interest in October 2003 will decrease because the Privy Council held that the duration of the franchise agreements was only three and not 10 years as was argued before. The Government is to pay the legal costs for NTCS.

"My client is very pleased at the outcome of the ruling," attorney-at-law Patrick Bailey said yesterday. He said the legal team, including Lord Anthony Gifford, was still studying the judgment and calculating how much it was going to be in terms of dollars and cents.

Bailey said there was going to be a reduction in the arbitration award, butthey expected damages to be nonetheless substantial.

The dispute with the NTCS and the Government began in 1998 when the Government granted to the Jamaica Urban Transit Co Ltd (JUTC), a company it owned, an exclusive licence to operate bus services in the Kingston Metropolitan Transport Region. This happened five years before the Government's 10-year contract with the NTCS and two other franchise holders had expired.

The NTCS sued the Government in 2000 seeking damages for its failure to publish a new fare table by June 1, 1995 in accordance with its obligation under the franchise agreements.

After the suit was filed, both the Government and the NTCS agreed to arbitration. Government lawyers took a preliminary point at the arbitration that the franchise agreements were illegal and void as the then transport minister had acted unlawfully in dividing up the Kingston area into a number of zones and issuing an exclusive licence in respect of the Kingston area.

The panel, of which retired Court of Appeal Judge Boyd Carey was chairman, dismissed the preliminary point and continued to hear and determine the claim.

In October 2003, the arbitrators ruled that the Government should pay the NTCS $4.5 billion, with interest, for the years 1995-2001 because it had breached the contract.

The interest was to be calculated from the end of each accounting year at Treasury bill and commercial bank rates.

The Government took the issue to the Supreme Court contending that the arbitrators erred when they failed to uphold the legal arguments that the franchise agreements were illegal. The submissions were upheld by the Supreme Court which, in June 2004, upheld the proposals, overturned the arbitration award and ordered the NTCS to pay the Government's legal costs in the Supreme Court, as well as for the arbitration proceedings. The court ruled that the arbitrators had erred in holding that the 1996 heads of agreement did not vary or amend the 1995 franchise agreement.

NTCS appealed and in May last year, the Court of Appeal upheld the Supreme Court ruling.