Court orders Chinese contractor pay $1.6bn over Bahamas resort development dispute

The Baha Mar Resort in Nassau, Bahamas (Image: Adog104 via Wikimedia Commons, Creative Commons Attribution-Share Alike 4.0)

The dispute centred around the multi-billion-dollar Baha Mar resort complex.

Affiliated companies China Construction America (CCA), China State Construction Engineering Corporation (Bahamas) (CSCECB), and CCA Bahamas (CCAB) acted as the general contractor and construction manager for the project.

Meanwhile, Sarkis Izmirlian was the chairman and CEO of developer BML Properties.

In 2011, BML, BMLP and CSCECB entered into an investors’ agreement to which they agreed BMLP would make an $830 million equity investment, while CSCECB would invest £10 million. When the agreed opening of the resort was missed in March 2015, BMLP contributed another $15 million in equity, taking its total investment to $845 million.

The developer collapsed in 2015 after a delay in opening the resort and launched legal proceedings in 2017.

Following an 11-day trial, Justice Andrew Borrok found that CCAB had deliberately slowed down work on the project, working against the best interests of BML Properties.

Amid delays to the work, Izmirlian was persuaded to pay out $54 million of disputed change order money, which the defendants had claimed was to be used to pay subcontractors on the project. In fact, they used this to purchase a competing Hilton project down the road from the resort.

This and other events pushed BML Properties into a liquidity crisis from which it could not recover.

Justice Borrok found that the defendants breached their best interests obligation under the investors’ agreement at least six times, as well as committing fraud at least four times. Those actions caused BML Properties to lose its entire $845 million investment in the Baha Mar development.

Dismissing the counterclaims from the defendants, he ruled that they are liable for BMLP’s $845 million investment, with interest running from 1 May 2014, which brings the total liability to around $1.6 billion.

Sarkis Izmirlian, chair and CEO of BML Properties and the original developer of Baha Mar, said in a press release issued by BML Properties, “I first conceived of Baha Mar more than 20 years ago, only to see it ripped out of my hands at the brink of opening by CCA.”

CCA is understood to be preparing to appeal.