On Monday 15 August 2016, the Curaçao Parliament unanimously adopted the National Ordinance Optimization Governmental Entities (Landsverordening Optimalisatie Overheidsgelieerde Entiteiten). The title of the national ordinance sounds promising: for who would not want the state-owned companies and foundations to function optimally? That would be great, but appearances are deceptive. Unfortunately, this national ordinance will not realize improvement in the functioning of governmental entities.

In several respects, the national ordinance is remarkably defective. The content has not been discussed with the parties directly involved – the managing directors and supervisory directors of these entities – or with the Corporate Governance Advisor. The formation has remained fully under the radar. Almost nobody knew about it. The Advisory Council, as appears now, has very little appreciation for the draft. But this has not led to substantial amendments or modifications. And all this is not even the worst part. The national ordinance is manifestly in conflict with the methodology of our civil law and even in conflict with international treaty law.

Just like almost all other countries, Curaçao has privatized all kinds of functions and responsibilities that used to be performed under the direct responsibility of the government. It concerns for instance generation of electricity, water production and distribution, telecommunications and public housing. The so-called state-owned companies and state-owned foundations were established for this purpose. The government does not control those entities directly anymore, but indirectly under private law. Think of the role of a shareholder or of a board member in the board of a foundation. The authority of a shareholder or board member is limited under private law. This authority fits into a system of checks and balances. All bodies in such entities have their own duties and responsibilities. These have been coordinated precisely. That is a very different situation than one in which the minister can tell his officials what to do. The government is no longer the boss in the state-owned entities. And that is where the problem lies. With this national ordinance the government tries to get a grip on these entities again.

This has little to do with optimization of these entities. The position of the government itself is “optimized”, because the legal system of checks and balances between the bodies of the company or foundation is bent exclusively in favor of the government. Based on this law, the minister can decide how much dividend will be distributed, the terms of employment will be dictated by the government, and all kinds of fundamental resolutions normally passed by the board will now be determined unilaterally by the government. Hence, this national ordinance clashes directly with Book 2 of our Civil Code. The management boards and supervisory boards of these entities actually become some sort of officials again, functioning in a ministerial hierarchy. How can they fulfill their legal responsibilities based on the Civil Code in that case? If there are other shareholders in a state-owned entity, they are directly deprived of their rights by this national ordinance. That is in conflict with international treaty law. Most ironic is that what the government intends to achieve with this law, get a better grip on the state-owned entities, can easily be achieved without this law, notably by making use of shareholders’ rights that already exist. I predict that many legal proceedings will ensue from this national ordinance. This is not optimal, except for the legal profession.

Do you have a question about corporate governance yourself? Please e-mail it to governance@vaneps.com and perhaps your question will be discussed in the next blogpost.