CCJ orders Guyana to repay unlawfully collected environmental tax to CARICOM beverage companies

The Caribbean Court of Justice (CCJ) on May 9, 2017 ordered repayment of unlawfully collected environmental taxes charged by Guyana against SM Jaleel & Co Ltd (SMJ) and Guyana Beverages Inc. (GBI). Guyana’s main defence that it should not have to repay the monies because the Companies had passed on the tax to their customers was rejected by the Court. The Court however agreed with Guyana that the Companies could not claim reimbursement for the full period claimed (from 2006 to 2015) but had to limit their claim to the last five years. The Court also ordered Guyana to pay 70% of the Companies’ costs. The Companies’ claim was filed in the Court’s original jurisdiction which deals exclusively with cases concerning the Revised Treaty of Chaguaramas (RTC) which governs the Caribbean Community (CARICOM).

SMJ, a Trinidad and Tobago-based company which manufactures and sells beverages in non-returnable containers, and its Guyanese daughter company which imports, sells and distributes SMJ’s beverages in Guyana, initiated proceedings against Guyana  on 7 March 2016. The companies approached the Court for a declaration that the environmental tax of G$10 per beverage container, which they were required to pay for many years, violated the provisions of the RTC as Guyanese companies were not eligible to pay this tax. They applied for an order for reimbursement of the taxes from January 1, 2006 to August 7, 2015, totaling an amount of more than 11 million US dollars. Guyana, in its Defence, argued, and offered to prove, that the companies had incorporated the tax into the price of their beverages and so passed on the tax to their customers. On that basis, Guyana argued that reimbursement of the tax collected would result in the unjust enrichment of the companies. Guyana also argued that the companies should receive no reimbursement as they waited more than a decade to bring their claim and were therefore barred by law from proceeding with the action.

The CCJ noted that this case was similar in circumstances to the previous case of Rudisa Beverages & Juices N.V. and Caribbean International Distributors Inc. v The State of Guyana. Given the similarity of the circumstances, the companies would have been entitled, on the face of it, to reimbursement of the unlawfully imposed environmental tax. The Court, however, determined that there were two preliminary points that had to be decided. Firstly, whether the principle of passing on, as a matter of law, could be used by Guyana as a defence in this case and, secondly, how far back could the companies lawfully go in claiming reimbursement?

The Court held that since the companies and their customers freely entered into a contract to sell and purchase the beverages, the companies were fully entitled to the benefit of the proceeds of sale of its beverages. Reimbursement of the tax to the companies could therefore not unjustly enrich them vis-à-vis their customers. On the other hand, to permit Guyana to retain the unlawfully obtained tax would result in Guyana being unjustly enriched. The tax did not promote cross-border investment provided for by the RTC but, “tended to frustrate free movement of goods, distorted competition and discriminated against the Claimants who should have been protected as belonging to the Community.” Therefore, Guyana had no basis for retaining the unlawfully collected tax and being unjustly enriched at the companies’ expense.

In examining whether the companies’ claim was barred by the passage of time, the CCJ agreed that a cut-off period was needed in keeping with the overarching principle of good faith recognized by the RTC. The Court looked at the underlying reasons for limitation of claims in international law and to the various limitation periods across the region which ranged from 3 to 6 years, and held that a period of 5 years was neither too short nor so long as to prevent a State from properly being able to defend a claim.

The CCJ granted the companies’ claim and Guyana was ordered to reimburse the tax it collected between the period March 7, 2011 (5 years back from the Claimants’ Application for Special Leave) to August 7, 2015 when the last unlawful collection of tax occurred. The judgment would carry interest at 4% per annum from the date of judgment. Guyana was also ordered to pay 70% of the legal costs of the companies.

The judgment of the Court and an Executive Summary are available on the CCJ’s website (click here).

Karel Frielink
(Attorney/Lawyer, Partner)

(11 May 2017)


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