Appeals Court upholds eviction of Mediterranean Film Studios

Government to take back control of Rinella film studios after company failed to pay its rent.

Malta's film water tanks are operated by Meditarranean Film Studios
Malta's film water tanks are operated by Meditarranean Film Studios

The Court of Appeal has upheld an eviction order by the Lands Department against Mediterranean Film Studios.

The ministry for home affairs, under which the Malta Film Commission falls, said the decision will free up the Rinella Film Facilities for the government’s continued development of the film industry.

The action against Mediterranean Film Studios was commenced under the previous administration, when the company failed to pay its dues to the Lands Department under a lease agreement.

The case was instituted by the Director of Lands against Mediterranean Film Studios, which has held the Rinella land which hosts the water tanks used for filming since 1995.

The company had already been ordered to pay arrears of ground rent of €803,000, accumulated over some 12 years of non-payment. According to court documents, the film studios were €5.4 million in debt as early as 2006.

As company records presented in court show, the company is wracked with banking debt, but studio owner Jost Merten claimed there was interest from investors to secure the studios’ future – a Russian company with various interests in filming, based in Malta, is known to be interested in the company, but Mediterranean Film Studios is prohibited by the emphyteutical concession to just sell off.

Unline the operators of the Café Premier - the Valletta coffee house that went bust and could not pay its government arrears and taxes - Merten’s Mediterranean Film Studios will not get a ‘bailout’ like Cities Entertainment Ltd did under the Labour government.

The Lands Department made it clear as much in its reply to Merten’s appeal, saying the emphyteutical contract gives government the right to reclaim the land when ground-rent is not paid for two years. The bill now has accumulated to some €1.5 million with interest.

“There is little chance that this money will be paid, when in the current circumstances the land can be put to better use so as to give government an income,” the department said in its appeal.

Even in its first decision, the Civil Court said that it was “more than evident” that Mediterranean Film Studios was not generating enough work to be economically strong to honour its commitments.

“To this court it is unacceptable that the emphyteuta can just sit on a fence without honouring its principal obligation to pay its emphyteusis with the excuse that other potential investors were waiting for the outcome of this case alone,” the first court said.

On his part, Mediterranean Film Studios owner Jost Merten claimed that the government wanted to evict the company due to plans for the construction of Smart City in the adjacent Ricasoli estate.

Merten said that in 2005, the Lands Department started refusing its payments, and that investments minister Austin Gatt was refusing to entertain the prospect of new investors in the studios. “The government did not evict the company over the non-payment of the emphyteutical dues, but because it was refusing to accept the payments in the first place.”

Merten and the Lands Department had agreed to a payment schedule as early as 2002, when it was made clear that Mediterranean Film Studios was unable to pay its annual rent. Merten claimed MFS’s debts were inherited losses from previous government administrations, incurred due to excessive staffing and a slump in film business during the 1990s.

Merten said he “accepted an invitation” to acquire MFS’s majority shareholding in 1999.

But by 2003, the company was facing over Lm2 million (€4.6 million) in banking debts, and finance minister John Dalli refused to have the studios shut down “because the government was committed to incentivise the film industry”.

Merten claims he poured over €1.1 million of his own resources into the company. “There are still investors, to this day, who are ready to pay all arrears to the government, as long as the emphyteusis does not get rescinded.”

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