Steward and the Maltese government: Making sense of their arbitration case

Whenever the Opposition insists that the State should recover all the money paid to Steward and Vitals, the official government line is that international arbitration proceedings are already underway.

Whenever journalists ask for more information on these proceedings, we are told that the details are strictly confidential.

However, the public bickering between Steward and the government allows us to glean some details of what’s happening behind closed doors at the International Chamber of Commerce.

MaltaToday takes a look at the public statements made about the case and speaks to lawyer Malcolm Mifsud to paint a clearer picture of the arbitration proceedings.

What is Arbitration?

Arbitration is a method of resolving disputes outside traditional court systems, where the parties in conflict agree to submit their issue to an independent third party, known as an arbitrator. The arbitrator reviews the evidence, listens to both sides of the argument, and then makes a decision, which is usually binding or non-binding.

Lawyer Malcolm Mifsud, a partner at Mifsud & Mifsud Associates, explained to MaltaToday that arbitration proceedings are, in theory, faster and cheaper than regular court proceedings.

One of the key differences, he noted, is the confidential nature of arbitration.

"Arbitration is not public, unlike court proceedings. Not even the documents are made available to the public," Mifsud said. "The parties in dispute enter into an arbitration agreement at the start of the proceedings, and a confidentiality clause is often part of this agreement."

While confidentiality is the general rule in such proceedings, the two parties can agree to make certain aspects public. Ultimately, the terms and conditions of the proceedings are determined by the parties involved.

Steward Healthcare (file photo)

Malta and Steward Healthcare

We know very little about the arbitration proceedings between Steward Healthcare and the Government of Malta. Government spokespeople choose their words carefully when asked about the case, citing strict confidentiality terms.

Despite the confidential nature of the case, the government has issued a few press releases announcing key decisions throughout the proceedings. This provides us with some insight into what might be happening behind the scenes.

In the first statement—just three sentences long—the government said it had "defeated" an emergency arbitration proceeding brought by Steward Healthcare at the International Chamber of Commerce.

"While the matter relates to the terminated concession, at this stage, the government cannot comment further on pending legal proceedings," the statement read.

This was issued two months after a local court annulled all contracts awarded to Steward and its concession predecessors, Vitals Global Healthcare.

A few days later, Steward Healthcare explained it had filed the emergency arbitration on 29 March that year "due to serious concerns surrounding the escalation of the termination dispute and its impact on the necessary handover process."

It added that the terms of the arbitration were confidential. "[The statement] continues to highlight the Government of Malta’s deliberate and calculated manipulation of the narrative and disregard for upholding international standards."

Fast forward to November of that year. Chris Fearne, the health minister at the time, told Parliament that Malta had won a second arbitration proceeding. Again, he provided little detail on the decision.

Mifsud stated that these brief statements about the case suggest that the parties involved in the dispute can publicly disclose certain aspects of the proceedings.

“If the government says they’re confidential, why would these two decisions be made public? And why wouldn’t any other decisions and rulings be made public? We don’t know of any rulings against the government. It’s up to their discretion,” he said.

Termination dispute

On 16 March 2023, about a month after the concession agreement was annulled, Steward said it would terminate the services concession agreement with the government due to breaches of the commercial agreements.

A couple of days later, the government rejected Steward’s termination and instead informed the company it would take over the hospitals in a "control step-in," effectively forcing the company out on its own terms.

To say Steward was displeased by this move would be an understatement. Threatening legal and police action, Steward stated the government had no legal basis on which to terminate the privatisation deal.

"Steward denies and rejects the Government of Malta’s attempts to terminate what was already a terminated concession. The government’s ‘control step-in notice and termination notice’ have no legal basis. Contrary to public statements made earlier this week, the

Government of Malta is legally not in a position to force its step-in and is therefore not currently participating in any additional capacity within the concession," Steward said.

Given the timing of the emergency arbitration filing, this could very well be the dispute under consideration by the International Chamber of Commerce.
The government informed Steward of this "control step-in" on 21 March. Steward told the government to back off on 23 March. Meanwhile, according to Steward, the company filed an emergency arbitration on 29 March due to the termination dispute.

Steward founder and CEO Ralph de la Torre shakes hands with Steward Malta staff during a previous visit in which he held talks with former prime minister Joseph Muscat. Steward Malta CEO Armin Ernst (centre) looks on

Steward files for bankruptcy

In May of this year, Steward Healthcare filed for bankruptcy in Texas. The company's bankruptcy filing identifies 30 creditors, collectively owed over $500 million, including the US government, which is owed more than $32 million in reimbursements for insurance overpayments.

Six months later, the Daphne Caruana Galizia Foundation warned the government that it must file proof of a claim in a US court on or before 4 November. If it failed to do this, Malta stood no chance of recovering any money through the bankruptcy proceedings.

This prompted another government statement, revealing the current status of the arbitration proceedings. On 3 November, a day before the proof-of-claim deadline, the government said it had been monitoring the bankruptcy proceedings and had engaged US bankruptcy lawyers to guide it through the process.

"It can be confirmed that the arbitration proceedings before the International Chamber of Commerce are currently at an advanced stage, with written pleadings expected to be concluded in the coming months," the statement read.

Furthermore, the government said any further comments on the situation "could be prejudicial to the government’s position in the arbitration."

What we know so far

Despite the confidential nature of the proceedings, we can piece together some details about the case from the public statements made by the two parties in dispute.

1. The case relates to the terminated concession.
2. The emergency arbitration was brought to the ICC by Steward Healthcare because of the escalation of the termination dispute.
3. The terms of the arbitration are confidential, but the government has been providing updates on the decisions of the proceeding and, more recently, the stage of the proceedings too.
4. We could expect the case to come to a close in the coming months.