The Export-Import Bank of Taiwan has confirmed that it had filed a multi-million dollar lawsuit in the United States against Grenada, a former diplomatic ally for defaulting on payments of four development loans.

Three of the secret loans amounting to 18 million U.S dollars were contracted between 1997 and 2000 by Prime Minister Dr. Keith Mitchell and his New National Party (NNP) government.  

The other loan, estimated at 10 million U.S was secured by late Prime Minister Herbert Blaize when he re-established diplomatic ties with Taipei shortly before his death in 1989.

The Taipei Times newspaper in a report issued quoted an official of the bank as saying that it had sued the Mitchell government in a New York court for violating its loan agreement because they were commercial loans dating back to the 1980s and not government-to-government deals.

The official, who wished to remain unidentified, said the loans were designed just like a Taiwan domestic loan, with the original agreement stating that the repayment period could extend from 20 to 30 years.

However, failing to make payment as stipulated in the contract constitutes a violation of the agreement on the borrowers part and is seen in the early termination of the agreement, the official said.

This means that Grenada must pay the loans back in advance, he added. According to the official, the commercial loans had been transferred into one of Grenadas accounts in New York so that the lawsuits would be handled under the jurisdiction of the New York courts to provide international impartiality.

Grenada was one of Taiwans diplomatic allies before it established ties with China in 2005. The Mitchell government took the monies from the Taiwanese bank to help fund the construction of Grenadas first sports stadium at Queen's Park, the Ministerial Complex in the Botanical Gardens, agricultural and road construction projects.  

Since April 2004, however, Grenada has failed to repay certain principal installments and interest on the loans. In order to recover the money, the bank filed a lawsuit against Grenada in a US District Court in the Southern District of New York on December, 21 2006.

The bank from Taiwan is being represented by the Boston-based law firm of Sullivan & Worchester, while the Mitchell  government has retained Brooklyn based Donzell Tucker, wife of Foreign Minister, Elvin Nimrod.

As part of its investigation, GRENADA TODAY was able to obtain a letter from one of the lawyers representing the Taiwan bank that was sent to Tucker giving details of the plans by the Export-Important Bank to recover the millions of dollars.

Following is the full text of the letter dated November 30, 2006:  

Donzell Tucker, Esq.
125 Ashland Place, Suite 9D
Brooklyn, NY 11201

Re: Ex-IM Bank V. Grenada

Dear Ms. Tucker:

This letter sets forth the settlement counter-proposal of plaintiff Export Import Bank of the Republic of China (³the Bank²) to defendant Grenada in this case.

Before setting out the basic terms on which the Bank is prepared to settle the case, we point out and reiterate that the Bank is an entity distinct from and independent of the government of the Republic of China.

Moreover, the Bank is not bound in any way by any arrangement that Grenada may have made with respect to the restructuring of Grenada's foreign debts with the Paris Club members or with the IMF.

The Bank views the lawsuit as one of a simple breach of commercial contracts by Grenada as the borrower. Following the breach, the entire outstanding principal under the four loan agreements immediately became due and payable pursuant to the declaration of default made by the Bank in accordance with the terms and conditions of the agreements.

The outstanding principal and interest (accrued but not paid) now carries interest at the rate of ten percent (10%) per annum from the date due for payment until the date of actual payment in full, whether paid before or after a judgment.

This counter-proposal is made in the context of what the Bank is entitled to recover from Grenada should this case go to judgment. However, in the counter-proposal, the Bank has reduced what it might otherwise recover in light of the apparent limitations of Grenada's economic growth caused by major natural disasters over the past years.

The essential conditions of the counter-proposal include the following:

(1). Upon reaching a settlement, Grenada would execute a consent judgment (or some other arrangement equivalent to a consent judgment) in favor of the Bank for the full amount of principal and interest as set forth in the Complaint, at the interest rate set forth therein (10%) and the Bank would undertake not to enforce the consent judgment as entered so long as Grenada duly performed its obligations under the settlement agreement.

(2). The four loans would be consolidated by the parties into one facility as follows:

(A) Accrued interest and late interest before December 31, 2005 is to be treated independently and will be calculated on the basis of a principal installment as and when due; such accrued interest and late interest as at December 31, 2005 shall be paid on the date of the effectiveness of the settlement agreement or within a reasonable period after the date of the settlement agreement, as may be proposed by Grenada and acceptable to the Bank.

Principal installments falling due before December 31, 2005 would be rolled over.

(B) From January 1, 2006 to December 31, 2008, interest at the per annum rate of four and one half of one percent (4.5% p.a) shall apply to the total outstanding principal amount of the four loans combined (including those installments overdue before December 31, 2005) and the total interest accrued during this period and accumulated on December 31, 2008 is to be paid in one lump sum on January 1, 2009.

(C) A grace period from January 1, 2009 through December 31, 2012 is to apply to the outstanding principal, during which an interest rate of four and one half of one percent (4.5% p.a.) will apply.

Grenada shall pay interest semi-annually on January 1st and July 1st of each year during this grace period commencing July 1, 2009 and ending on January 1, 2003.

(D) Total outstanding principal as at December 31, 2008 is to be repaid by semi-annual installments on January 1st of each year. The principal installment will be calculated and repaid in accordance with the percentage as proposed by Grenada so that the whole outstanding principal will be fully amortised on July 1, 2013.

Interest at the rate of four and one half of one percent (4.5% p.a.) will apply to the principal from time-to-time outstanding and be paid on January 1st and July 1st of each year commencing July 1, 2013.

Should Grenada default in any payment, whether of interest or principal, then the entire amounts due under the consent judgment shall be immediately due and payable.

Put another way, all outstanding principal, accrued and unpaid interest, and late interest payments due and deferred, shall immediately become due and payable and post-default interest rate at ten percent (10%) per annum will apply to all sums due and payable.

As you know, the Court has ordered that all dispositive motions must be fully briefed by January 30, 2007. In light of that, the Bank will move shortly for summary judgment.

However, this should not deter the parties from actively engaging in and reaching a settlement agreement before the motion for summary judgment is due to be disposed of by the Court.

If you have any questions with regard to this counter-proposal, please do not hesitate to inquire. In light of the Court's schedule, we would request Grenada's promptest possible consideration.

Please bear in mind that a final binding settlement agreement would be achieved only through a formal executed document.

Kind regards
Paul E. Summit