Arbitration Blocked by Federal Judge in Haitian Radio Dispute
Saturday, January, 17, 2015
An agreement between telecommunications company Teleco and mobile phone company Haitel that required Teleco to accept payments in shares instead of cash and to resolve all disputes in binding arbitration in Bermuda cannot be enforced, according to a Federal Judge in Haiti, because the Teleco official who entered into the deal on behalf of the company was not officially authorized to do so.
Teleco originally entered into a deal with Haitel to use a radio wave band that Haitel had the rights to. Haitel is currently in bankruptcy proceedings, and its assets have been seized by the government of Haiti. Teleco had purchased a 15-year lease of the radio band in 1998. The deal required an up-front payment to Teleco of $14.5 million and a 5% payment of Haitel’s net profits annually.
A few months later, Teleco’s General Director Julio Cadet contacted Haitel to direct that Haitel shares should be used for the $14.5 million payment. Cadet was not a member of the board of directors of Teleco at the time, and was not authorized to make this change to their agreement. The arbitration clause was also part of this unauthorized agreement.
The Teleco board became aware of the unauthorized agreement when it demanded payment of the $14.5 million and subsequent fees in 2006. Teleco sued Haitel shortly afterwards for breach of contract. The litigation is still pending at Haiti’s high court. Six years after the suit was filed, Haitel attempted to force arbitration, citing the agreement that Cadet signed.