Government sought €488m from Steward and lost

Robert Abela and his justice minister came out on Monday claiming “victory” in the Steward Health Care arbitration case decided by the International Chamber of Commerce. 

The prime minister tried to set the narrative at a point when the judgment itself was not yet available to anyone but the Office of the Prime Minister. 

The government finally published the 200-page ruling by the ICC on Friday following a briefing for journalists at Castille. But a careful reading of the judgment tells a different story from the one peddled by the spin doctors at OPM, including the prime minister. 

It was disingenuous of Abela to claim victory, be it political or legal. Indeed, Article 1054 of the arbitration tribunal judgment states: “…overall, no clear winner emerges from this arbitration.” 

In its final outcome, the tribunal ruled that after considering the claims made by Steward and the Maltese Government’s counter claims, Malta would have to pay the now-bankrupt American company €4.8 million with interest. 

At a press conference on the day the judgment was delivered (Monday, 3 November) Abela said the ruling vindicated his stand all along that the Opposition’s claim that Steward stole €400 million was false. The ruling shows that the government did actually believe the Opposition’s claim. 

The “authoritative ruling”, Abela had said “exposed the Opposition for repeating false narratives in the hope they would be believed”. He insisted that it was not true that Steward were paid for services not rendered. At this juncture, no one had access to the ruling and the government was providing very little detail as to what its counter claim at the ICC had been. 

It now transpires that the government had really been requesting Steward pay €488 million for failure to deliver services and failure to fulfil contractual milestones as determined by the hospitals concession agreement. 

Basing its defence entirely on the Delia Judgments—the initial ruling of the Maltese court to rescind the contract was called Delia I and its confirmation on appeal called Delia II, collectively referred to as the Delia Judgments—the government sought reimbursement of €488 million from Steward. But in the end, it lost its claim. 

The only victory was that the tribunal rejected Steward’s claim for €158 million that was based on the side agreement it had secretly signed with then minister Konrad Mizzi in August 2019. That agreement meant that if the Maltese courts rescind or annul the contract, it would be construed as a government default, obliging the government to pay Steward a cool €100 million. 

The Delia Judgments had rescinded the contract and all side agreements, rendering the surreptitious arrangement null. 

Steward’s invoices never challenged 

According to Article 929 of the judgment, the tribunal dealt with the question as to whether the value of services claimed by Steward should be reduced by 40% or 80% because of “partially deficient” performance as argued by the Maltese Government. 

Effectively, what the government was arguing at the ICC was exactly what the Opposition and other stakeholders in Malta had been arguing all along—Steward failed to fulfil its contractual obligations and had to pay back €400 million. 

But the tribunal rejected this argument, giving weight instead to Steward’s claim that throughout the concession agreement the government had never challenged any of its invoices. 

Articles 934 and 935 of the ruling lay down the tribunal’s reasoning: “The Tribunal is not convinced that the healthcare services provided by the Claimants [Steward] were substantially lacking from a quantitative or quality perspective. The Claimants rightly point out that during the lifetime of the Transaction Agreements, the GoM [Maltese government] never claimed any deduction on the HSDA [Healthcare Services Agreement] invoices… For the Tribunal, there exists no compelling evidence that deductions from the payments for Claimants’ healthcare services are warranted.” 

The tribunal’s decision raises question marks about the lack of government oversight while the concession agreement was in place and whether this was intended. One interpretation is that no one in government responsible for this concession agreement had an interest in defending the public interest. This is not a spurious interpretation. Indeed, it has to be noted that in its defence at the tribunal, the government wholeheartedly embraced the Delia II judgment that spoke of collusion between Steward and Maltese public officials. 

The Maltese Court of Appeal had ruled: “In the opinion of this court, the events of the story do not show deception by one party and ingenuity from the other, as the First Hall believed, but collusion between the appellant companies and high-level representatives of the Government or its agencies which led to the signing of simulated contracts not intended to provide a quality medical service but for ulterior motives.” 

No evidence to substantiate claims 

In its bid to claim back almost half-a-million euros from Steward, the government argued that Steward “failed to achieve the concession milestones”, insisting this had “a direct and material impact on the value of the healthcare services delivered”. Article 887 of the ruling lists the Maltese Government’s defence: “Ignoring the Milestones when assessing performance would distort the contractual framework the Parties had agreed… Steward’s effort to treat the pre-Completion period as exempt from these binding obligations is wholly unfounded.” 

The government also noted Steward’s failure (Article 888) to deliver the capital investment for the redevelopment of the hospitals and to develop medical tourism, obligations listed in the contract. 

Moreover, the government accused Steward (Article 889) of failing to “develop services” during the transition period, which constituted a contractual breach since the company was obliged to offer “continuous service provision at or above pre-concession levels”. 

Nonetheless, when push came to shove the government failed to provide the evidence to substantiate its claims. 

“The Respondent [Government of Malta] has not provided the Tribunal with any relevant evidence that would indicate the existence of ordinary, let alone critical, service failures by the Claimants [Steward],” the tribunal ruling states in Article 939. It adds that no discounts were ever contemplated, let alone applied, in line with provisions found in the agreement, while the concession was in operation. 

The tribunal also gave short shrift to the government’s argument that failure to meet the milestones was justification to discount the fees paid to Steward for healthcare services. 

In Article 954, the tribunal says it has no need to examine ‘the failure to meet concession milestones’ argument. “This appears to be an issue and source of considerable confusion in the minds of the GoM [Government of Malta] and its representatives, and where, in the Tribunal’s view, the Delia Judgments have reached questionable conclusions on this matter,” the tribunal states. 

Key players did not testify 

In a table accompanying its judgment, the tribunal then lists the benefits received by either side from the agreement. Steward received benefits worth €884.6 million, while the government received services in kind worth €889.4 million. As a result, Steward ended up with a balance in their favour of €4.8 million. 

Interestingly, none of the key people from Steward and the Maltese Government who were involved in the concession were summoned to testify by the parties. Although the tribunal states their testimony was unlikely to have changed its findings, it felt the need to underscore the absence of people like Armin Ernst, Ralph de La Torre, Konrad Mizzi, Chris Fearne and the permanent secretaries at the health and Gozo ministries, among others. 

“Notably, neither side offered evidence from those people who were either decision makers or very closely associated with the Concession, be it at its initial or final stages or in between,” the tribunal notes in Article 168, and adds in Article 172: “Given the substantial sums at stake in this arbitration, it might have been expected that testimony would be provided by those with the most direct knowledge of the facts.” 

The ICC ruling may have put a lid on litigation proceedings between the government and Steward but it does not alter the fact that 10 years after the hospitals concession agreement was conceived and signed, Malta is still without the promised healthcare facilities and may have lost its chance to reclaim the millions that flowed to Steward.