Arbitration rules that NMI liable to pay MRC $5.46M

Arbitration proceedings on the dispute between non-profit Marine Revitalization Corp. and the CNMI government have concluded, finding the latter liable to pay claims of over $5.46 million.

The longstanding dispute between MRC and the CNMI Department of Lands and Natural Resources came to an end after arbitration officers reached an order Friday, which would need to be submitted to the Superior Court so that the latter could enter a corresponding judgment.

The order also awarded attorney’s fees and expenses in the amount of $255,879.89 to the law firm of O’Connor Berman Dotts & Banes. It also set fees and expenses to arbitration officers Edward Manibusan, David Mair, and Robert A. Hefner in the amounts of $3,049, $2,250, and $11,992.10, respectively.

Arbitration proceedings resumed last Nov. 30, after being suspended in 2002. The dispute arose in 2001, with the MRC accusing the DLNR and the former Office of Public Lands of breaching the terms of the partnership.

MRC, which was established by businessman Anthony Pellegrino, built the Outer Cove Marina in the mid-90s, with the end objective of turning it over to the government.

“In the early 1990s, it became apparent that the island of Saipan could use a marina because suitable mooring space was limited or non-existent. Practically, the only viable marina was at Smiling Cove near Outer Cove, but there was a long waiting list for slip space,” the arbitration order stated.

MRC then proposed the construction of the Outer Cove Marina, leasing submerged land that was memorialized in an agreement dated Aug. 24, 1995. A provision of the agreement bound the DLNR secretary to establish a policy to bar owners of commercial passengers and fishing boats from renting slips at Smiling Cove.

The purpose of the provision was to divert commercial vessels to the Outer Cove Marina. “The mooring monopoly would insure that the Outer Cove project was viable and would be economically secure,” the order stated.

MRC then proceeded to build the marina, which was opened in 1998. The dispute arose because the government not only failed to bar commercial vessels from renting slip space at Smiling Cove, but also actively solicited commercial lessees.

“It also must be recognized that the original intent and desire of DLNR and MRC was to be partners in the sense that the marina was to be a community project and the marina would eventually be turned over to the government,” the order stated.

MRC’s position resulted in Pellegrino’s difficulty to pay off loans that the company incurred in constructing the marina project, prompting it to seek rescission of the lease agreement.

The order based the award to MRC by ascertaining the cost of constructing the marina, including interests on loans obtained by MRC, which were audited by the CNMI Public Auditor.

The award totaled $5,468,818. The amounts payable to Pellegrino are $3,377,513; Saipan Ice & Water, $1,083,400; Show Boat, Inc., $3,887; Saipan Sea Ventures, $508,483; Pelly Boat Charter, $40,016; Pelly Enterprise, $46110; and Mobil Oil, $409,408.