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Gov’t warns ‘high-stakes’ bauxite shutdown risks $6b in new taxes

Published:Monday | March 27, 2023 | 1:00 AM

The Government has told the appeal court that cutting welfare spending or imposing $6 billion in taxes are the main options facing Jamaicans if two bauxite companies are not allowed to mine parts of St Ann and Trelawny. State lawyer Lisa White gave...

The Government has told the appeal court that cutting welfare spending or imposing $6 billion in taxes are the main options facing Jamaicans if two bauxite companies are not allowed to mine parts of St Ann and Trelawny.

State lawyer Lisa White gave details of the potential devastation for the local economy last Friday during her submissions to the three-member Court of Appeal panel hearing arguments brought by Noranda Jamaica Partners II and New Day Aluminium (Jamaica) Limited.

The Government owns a 51 per cent stake in Noranda Jamaica Partners II.

The companies are asking the court to overturn an injunction blocking them from mining under the 25-year Special Mining Lease (SML) 173. The injunction was not granted in two areas covered by SML 165 and 172, which are almost depleted.

Supreme Court judge Justice Anne-Marie Nembhard granted the injunction on January 20. Nine residents applied for the restriction until their constitutional case against the mining licence is tried in November and December.

White told the panel that the Government adopted the submissions of the companies, which argued that Justice Nembhard did not give sufficient consideration to the “staggering implications” for the companies and the Jamaican economy if an injunction was granted.

She questioned how the judge came to the conclusion that the residents proved that the potential harm from continuing to mine was not known and could not be quantified or that they stood to lose far more than just money.

Although the bauxite-alumina industry accounts for about two per cent of Jamaica’s gross domestic product, Finance Minister Dr Nigel Clarke has argued that it is of “vital economic and developmental significance”.

White, who works out of the Attorney General’s Chambers, urged the Court of Appeal to pay attention to an affidavit from Cebert Mitchell, a technical specialist for tax reform in the Ministry of Finance and the Public Service.

Mitchell outlined that some US$35 million is projected in tax collection from Noranda and New Day for the current financial year, which ends on March 31. That figure includes bauxite production levy and royalties. The tax collection for the period 2023-2027 is US$139 million.

The levy, which the Michael Manley administration introduced almost 50 years ago, represents a tax on bauxite/alumina companies operating in Jamaica on the basis of their output rather than on profits.

The Government uses the money to support the mostly rural communities affected by mining as well as for broad social-assistance programmes.

Mitchell argued that if Noranda and New Day do not get to mine under SML 173, their closure would result in “negative growth for the Jamaican economy” for this financial year.

“Were bauxite and mining to be shut down, … the Government of Jamaica would be confronted with a gap in financing the annual Budget. A loss of bauxite levy would mean that cuts would need to be made to the expenditure budget for the Government at a time when the Government’s social-assistance programme has significant demands,” Mitchell said in the affidavit dated October 25, 2022.

The alternative to cuts, the specialist said, would be the imposition of tax measures of at least 0.2 per cent of gross domestic product, which he calculated to be approximately $6 billion.

“It is, therefore, noteworthy that no new taxes have been introduced by the Government of Jamaica since 2018,” he said.

At present, Noranda Jamaica Bauxite Partners II is the only bauxite plant operating in Jamaica. There are three refining operations: Windalco Ewarton Works, Jamalco, and Alpart.

The bauxite levy is expected to increase by an estimated US$24.5 million from the export of 3.5 million tonnes of crude bauxite if Noranda and New Day gain access to SML 173. Royalties are estimated at US$1.7 million.

Noting that during the COVID-19 pandemic, the industry was the only one that remained fully operational, Mitchell also highlighted the “positive economic gains and offshoots” associated with bauxite mining in Jamaica.

He pointed to, among other things, new and improved housing for communities, income generation, direct and indirect employment of over 15,000 Jamaicans, establishment of wells, creation of 120 greenhouses, major infrastructure development, and skills training initiatives.

In 2020, the lobby Jamaica Environment Trust published a compendium of reports, which, essentially, concluded that bauxite mining was inadequately regulated, that it disrupted the livelihoods of small-scale farmers, and that there was little empirical analysis of the industry’s real economic value to Jamaica, compared to the damage it caused.

The Government urged the court on Friday to rule in favour of the “public interest”.

“It is clear that the stakes are, indeed, very high on the government side and the losses would be insurmountable … . We implore this Honourable Court to … discharge this injunction,” White argued.

Carlene Larmond, KC, who is representing the bauxite companies, also completed her submissions last week.

She reiterated that the Supreme Court judge did not appear to have grappled with the potentially devastating implications for the companies and the national costs, given the possible loss of 400 direct and 2,000 indirect jobs.

Larmond also said that the companies were not convinced that the judge applied the relevant legal principles before accepting the claim from the residents that their health was threatened by the mining activities.

She said the residents were engaging in a “blame game”.

According to her, when they recognised “the paucity of their evidence, they alleged that they could have had evidence if the companies had conducted a health-impact assessment.

“This is a highly inflammatory submission,” Larmond said, arguing that there was a ruling from the lower court judge that struck sections of an affidavit submitted by a doctor.

The bauxite companies are also challenging the decision of the lower court judge to waive the requirement for the residents to give an undertaking to compensate them for losses if it turns out that the injunction was wrongly granted.

The residents have said they don’t have the financial capacity because they are mostly subsistence farmers who are getting legal aid to mount their case.

Larmond said it appears that the judge only considered the financial state of the residents and did not apply established legal principles to recognise that the current case was one in which “the risk of serious and uncompensated detriment to the defendant cannot be ignored”.

The judge did not reference the companies’ claim that they would “die” if they are not allowed access to SML 173 in the one-year period leading up to the trial, the lawyer also contended.

For the companies, the residents are “not at risk of irreparable harm” based on their distance from the mining areas and the “enhanced” protections under the permits.

Larmond also raised questions about the motives behind the residents’ push for the injunction and the role of lobby group Freedom Imaginaries, which “has publicly claimed responsibility for this litigation”.

“There are excerpts from its website … describing this matter as its first case as part of this strategic human rights litigation and advocacy project. There is a stated mission of tackling the legacies of slavery and colonialism and contemporary forms of oppression. One such legacy they say is extractivism,” she said.

She said all the lower court was asked to do was to consider the role of the lobby group “as a relevant factor when assessing the dominant purpose of this injunction”.

“The bottom line is that this is a project launched by them from as far back as 2021. This is a project in which, in 2021, they were gathering the information to file this case and others. Yet in July 2022, there is this indecent haste to injunct the companies until trial.”

Freedom Imaginaries was founded by Jamaican lawyer Malene Alleyne, a former human rights specialist at the Inter-American Commission on Human Rights.

The residents, who are represented by King’s Counsel Michael Hylton, are to make their oral responses to the bauxite companies on Thursday.

They are contending that the mining activities have breached – or are likely to breach – several constitutional rights, including their fundamental right to life and the right to reside in any part of Jamaica.

The panel hearing the matter is headed by Court of Appeal President Justice Patrick Brooks.