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Thursday, May 28, 2015

Departure Policy

By Pieter Soons , filed under: Corp. Governance

After elections, the outgoing Government stays in place until a new Government is formed to ensure the continuity of governance. This outgoing cabinet should, based on unwritten constitutional law, only take the role as caretaker, and thus avoid any controversial decisions.

However, sometimes an outgoing cabinet takes decisions which are outside the scope of its role as caretaker, or which would never have been taken by the new Government, and aim to place the incoming Government for a “fait accompli” (read: an accomplished fact). Examples in case law include the issuing of parcels of land in long lease to companies, granting positions in government for an unusually high salary, or forcing government owned companies to appoint persons they would otherwise not have hired.
In some cases, the incoming government decided to reverse such decisions, which in turn led to litigation on this subject. By judgment of 1 March 2002, the Court of Appeal formulated its “departure policy case law”, on a case which took place in Sint Maarten.

In 1998, X Development N.V. (X Development) entered into negotiations with the Government regarding the development of a plot of land between the Courthouse and the Clem Labega Square. The Government intended to issue this land in long lease to X Development. It requested advice from the Department of Spatial Planning and Legal Affairs, who both issued a negative advice because the plans were contrary to the development plans for Philipsburg. On 21 May 1999, elections were held, and on 2 July 1999, the new Government took office, only to find out that on 30 June 1999, the outgoing cabinet (back then it was the Island Council) had decided to issue the land in long lease to X Development. Given that the new Government had other plans with this area, the decision was reversed, and X Development took the Island Territory to court.

The Court of Appeal first considered that it is common that, just before a change of government, decisions are taken that are of a dubious nature and/or insufficiently prepared, with no other motive than to place the incoming government, which would likely have taken another decision, for an accomplished fact, which has consequences for the scarce resources available to government as well as the public interest. This led the Court of Appeal to conclude that, taking into account the limited scale of the island communities and for the common good, such decisions must be critically examined by a court as to their intended purpose. The Court of Appeal furthermore considered that in this specific case, taking into account all circumstances, the decision was null and void due to the fact that it was contrary to public order.

This judgment had far-reaching consequences. If a decision is declared null and void, it is considered to never have existed, so it will be difficult to obtain compensation for damages. Furthermore a judge interferes deeply with the actions of the Government. This can be contrary to the division of powers doctrine, which forms the basis of our parliamentary democracy. This doctrine states that the Government is monitored by parliament and that courts can only marginally examine or test decisions made by the Government against the law and general principles of good governance. Justification for this law has been given due to the special position of the court in the Dutch Caribbean society and its function as a shepherd of the public order.

Recently two judgments were given in Aruba based on this doctrine. In one case, an outgoing Minister instructed the director of a public transport company to create a function and hire an outgoing parliamentarian. In the labor agreement, a provision was included that the salary had to be paid until pension, even if the employee was dismissed or fired. Other circumstances included that the function did not exist before, there was no public hiring process, and the parliamentarian was not qualified for the function as he had no relevant experience or education level. This case was unique because the decision to hire this parliamentarian was formally taken by the director of the company, not the Minister. The Court considered, however, that 1) the Minister had pressured the director to make this decision and 2) that by doing so, the Minister attempted do circumvent a law which was aimed at preventing abuse of government resources. Taking all circumstances into account, the labor agreement was considered null and void.

In the other case, a Minister promoted an employee of the tourist bureau, against the express advice of the director of the bureau, who had serious doubts regarding the capabilities of this employee. The Minister also extended her employment contract for another five years and granted her a salary that was higher than the director’s. This labor contract was also considered null and void by the Court of Appeal. An interesting fact in this case, is that the promotion occurred just before elections and that the decision was thus formally not taken by a caretaker Minister.

This recent case law shows that the court will continue the line it set out in the X Development case and will critically examine decisions taken by outgoing cabinets. The last case shows that there is a sliding scale, which may mean that the court will also critically examine decisions taken by “normal” cabinets. This is, however, uncertain at this point in time. On the one hand, the departure policy case law creates the risk that a court influences the political process in a manner which is contrary to the unwritten rules of our constitutional democracy. On the other hand, it is clear that outgoing cabinets have often abused their position and have not always adhered to their role as caretaker. Critical examination of such decisions may prevent the practice where individuals are given preferential treatment by outgoing Governments at the expense of the general public and common good.