Governmental authority over the second city of the Bahamas confirmed in arbitral Award of major public importance

11/03/26

An international arbitral tribunal has issued a Partial Award in an arbitration between the Government of The Bahamas and the Grand Bahama Port Authority (“GBPA”) concerning the interpretation and operation of the Hawksbill Creek Agreement (“HCA”), a colonial-era agreement governing the development and administration of the Port Area of Freeport, Grand Bahama. 

The tribunal comprised The Hon Anthony Smellie KC (Chair), Lord Neuberger of Abbotsbury, and Dame Elizabeth Gloster DBE.

The arbitration addressed the scope of the Government’s continuing legislative and regulatory authority in the Port Area, and the GBPA’s obligations to contribute to the Government’s administrative costs incurred there. The parties and the Tribunal have agreed that the Partial Award may be made public, given the national significance to The Bahamas of the matters that have been decided.

The HCA, concluded in 1955 between the Colonial Government and the GBPA, established the legal framework for the development of the Port Area of Freeport, now The Bahamas’ second-largest city.

Under the HCA, the Government historically had a right to recover certain administrative costs incurred in relation to the Port Area. In 1994, in connection with arrangements for the extension of substantial tax concessions to the GBPA and licensees of the Port Area, the parties agreed a review mechanism requiring the GBPA to make annual payments to defray the Government’s expenses. In recent years, however, the GBPA has disputed the existence of any liability to make payments to the Government, as well as contending that the Government has for many years wrongfully sought to exercise legislative and regulatory authority over the administration of Freeport.  The arbitration was commenced against that backdrop.

The Government’s claim

The Government has claimed reimbursement from the GBPA in the sum of B$347m.  The Tribunal held that, although the original right to reimbursement under the HCA was replaced by the review and payment mechanism agreed by the parties in 1994, the 1994 mechanism remains legally enforceable, and that the Government is entitled to invoke the review process and recover administrative expenses for the remainder of the HCA, which runs until 2054. The Tribunal will determine any sums payable in respect of earlier years in the next phase of the arbitration.

The GBPA’s counterclaim

The GBPA advanced a substantial counterclaim, originally seeking B$1 billion, alleging that successive Governments had interfered with its administration of Freeport and diverted investment projects away from the Port Area.

The Tribunal rejected the counterclaim almost in its entirety, holding that the GBPA had conceded to the Government decades ago its rights to administer the Port Area as a private enclave. The Tribunal accepted the Government’s case that the parties had a longstanding agreement from 1968, under which the GBPA had agreed to Government involvement in matters including licensing, immigration and customs controls, development approvals and utility regulation in Freeport. Having agreed to and operated under those arrangements for decades, the GBPA could not now contend that the Government had no such rights.  This decision finally determines a decades-long dispute about the governmental and administrative control of Freeport and the extent to which the Government’s authority runs in that city.  It is a decision of major political and public importance.

The GBPA’s counterclaim succeeded on one limited issue concerning delays in consideration of certain proposed environmental bye-laws, although the Tribunal noted that it was presently unclear whether any recoverable loss had been established.

Next steps

The arbitration remains ongoing. In the next phase of the proceedings, the Tribunal will determine the sums payable in respect of The Government’s incurred administrative expenses.

A copy of the Partial Award is available here.

Following publication of the Partial Award, the Attorney-General of The Bahamas addressed the decision at a press conference, and the Prime Minister of The Bahamas also made a statement in Parliament and laid the Partial Award before the House of Assembly.

See also relevant news coverage of the Partial Award here and here.