An ‘escape clause’ from which there is no ‘escape’

Why, exactly, did Konrad Mizzi negotiate an ‘escape clause’ which so clearly works against his own government’s interests? 

Last Sunday, this newspaper carried an analysis piece, asking the following question: why did former minister Konrad Mizzi choose to include a €100 million ‘exit penalty’ – to be paid by the government of Malta – in the 2019 deal with Steward Healthcare, to take over three public hospitals?

As is widely known, Vitals Global Healthcare - an unknown consortium of medical entrepreneurs – was awarded a 30-year concession to run three state hospitals in December 2017. But VGH racked up millions in debt with nothing to show for it, negotiating a buy-out of some €15 million from Steward.

Later in 2018, Bank of Valletta granted Steward a €5 million overdraft facility and a €3 million loan; but in August 2019, BOV also consented to a loan of €22 million, and another of €5.9 million, to two Steward subsidiaries.

Apart from placing the hospital lands under Steward’s control as guarantees for the debt, the agreement gave Steward unprecedented generosity by accepting that, should the concession be rescinded by any law, public order or decision, judgement or decree – effectively any government or court decision – such an event will be “a non-rectifiable government of Malta event or default.”

MaltaToday revealed the existence of a side letter, hurriedly-written by then-Energy Minister Konrad Mizzi in March 2020, showing how the Maltese government was exposed to a hefty bill should the concession ever be rescinded. As a result of the ‘escape clause’ attached to the deal, the taxpayer stands to lose a potential E100 million, should the hospitals’ concession be terminated by a court of law: for whatever reason, and even if Steward is in breach of contract.

Meanwhile, the question has only become more pertinent ever since. Just yesterday, for instance, Prime Minister Robert Abela declared that he himself only learnt of the €100 million penalty agreement in 2019, after the deal was already signed.

Considering that, at the time, Abela was both an MP, and also sat in Cabinet as an advisor to then prime minister Joseph Muscat, his statement seems to reinforce the point that Konrad Mizzi had acted alone, and without consulting his Cabinet.

Even so, however, we are still no closer to explaining why Mizzi chose to do it at all. The 2019 agreement simply does not make sense: because it gives government no lee-way whatsoever in the event of a breach of contract – as would indeed happen, if Adrian Delia’s ongoing court action is successful.

This much was also evident in Abela’s carefully-chosen words to the press: “The government will do everything legally possible to get out of the €100 million penalty, if Steward decides to withdraw from the contract,” he said. “Our message to Steward is that the government will pursue every legal action possible , should the contractual obligations not be met.”

And yet, Abela must surely realise that the terms of this contract – as signed by his own government in 2019 – leave him with no real ‘legal avenues’ to even pursue. As such, he is left with a decision of a very different nature to take: he must now decide what to do, when confronted with the sheer extent of the damage caused by all the institutionalised corruption that took place under the preceding administration.

Simply put, it is not enough for Robert Abela to concede that the Steward concession was a ‘bad deal’ for Malta - if not an outright travesty of good governance - or even to take legal action against its consequences. He must also begin the task of disentangling his own government from the tentacles of the mafia-style ‘octopus’ that still evidently clings to it, at certain levels.

For while the Steward ‘escape clause’ threatens to have very real consequences, from which his own government will find it difficult to ‘escape’… it remains but one of several government contracts – including Electrogas – to have been mired in corruption, and which still bind successive governments to this day.

It was for this reason that, in March this year, this newspaper had editorially called on Abela to “bite the bullet, and acknowledge the reality of the festering corruption between 2013, and 2020.”

There are, after all, only so many ‘corrupt contracts’ a government can continue to defend, before being engulfed by the same corruption itself. And while Robert Abela has indeed taken action to distance himself from his predecessor – including expelling Konrad Mizzi from the Labour Party parliamentary group – he remains reluctant to unequivocally condemn the actions of his former colleagues… even when those actions threaten to undermine his own government.

In particular, it is unacceptable that the Labour government continued to uphold Konrad Mizzi’s filibustering antics in the Public Accounts Committee – before health problems prevented him from attending – when, by rights, it should have been government itself to ask all the important questions.

These include the one with which we started: why, exactly, did Konrad Mizzi negotiate an ‘escape clause’ which so clearly works against his own government’s interests? And just by publicly answering that one question, once and for all… Robert Abela may well go some distance towards finally cleansing this country of its institutional rot.