The agreement is under completely new terms and conditions, and includes a time-frame as to when the project is to be completed.

Dr Caruana, a lawyer, is a well-known Gozitan businessman and together with his brothers runs a long established firm – Joseph Caruana Company Limited.

The firm has long been involved in general trading activities both in Malta and in Gozo. Dr Caruana has also recently taken over the presidency of the Gozo Business Chamber and is currently the President of the Leone Band Club of Rabat, Gozo.

The development at Fort Chambray has been stalled since July 2002 when all development permits lapsed and were not renewed by the developers. Moreover, there are currently six stop notices issued by Mepa over the development. It is also understood that the development seems to have stopped altogether because of serious financing difficulties with the developers unable or unwilling to invest more money in this high-profile development.

The present state of development of Fort Chambray is that work on the larger share of the 246 apartments that had to be constructed has started and the apartments are in various stages of completion. The building of the projected hotel has not been started altogether.

While the characteristic buildings known as Dar it-Tabib and the Polverista have been restored, the restoration on the building known as the Knights Barracks has not started as yet and little has also been done as far as common infrastructure for the whole area is concerned. Mepa has also raised various issues with the present developers holding that development methods used have inflicted damage to historical sites and is not in line with permits issued.

By way of background, in 1993, Fort Chambray was given a temporary emphyteusis for 99 years to Fort Chambray Co. Ltd, a company owned by Antimen srl (51 per cent) and the Malta Government Investments Ltd (49 per cent). Antimen is a company registered in Monaco and controlled by Avv. Roberto Memmo, an Italian businessman.

Fort Chambray Co. Ltd in turn granted the sub-emphyteusis to two companies, Forti Developments Ltd and Forti Resort Hotels Co. Ltd, who took upon them the obligation to effect the development within Fort Chambray. In return, the government received a ground-rent of Lm12,000 per annum while, when the development would be completed, Fort Chambray Co. Ltd was due to receive 24 apartments.

In May 2003, with the development at a complete standstill 10 years after the land was granted in emphyteusis, the Ministry for Information Technology and Investments was faced with two distinct options – either to seek the termination of the contract through legal means or else seek resolution through an agreement with present or new developers that ensures completion of the project.

The former, after consultations with the Attorney General, presented a number of legal difficulties apart from the inevitable time that such a court case would have involved as well as the possibility of the lending bank foreclosing on the development. Moreover, a long-drawn litigation on this matter would have augmented the negative aesthetic impact of Fort Chambray remaining in its current state.

Consequently, Government opted for the latter option, which meant negotiations with the present developers since through their shareholding and attached pre-emption rights, they held the key to the development. It should be pointed out that the major stumbling block to this way forward was that since Avv. Memmo still held the original emphyteusis over the development, any new agreement had to seek his consensus.

In June 2003, Minister Gatt

initiated discussions with the developers on the basis of the

following pre-conditions:

• All the present contracts had to be rescinded and a new contract entered into between Government and developers, present or new;

• The developers, present or new, had to act only through companies registered in Malta and the beneficial shareholders thereof had to be known to Government;

• The developers, present or new, were to bind themselves by new time limits to finish the development and the non-observance

of which would lead to the

termination of the emphyteusis;

• The developers, present or new, would be prohibited from transferring their shares before the completion of each stage of development in order to guarantee the completion of the full development; and

• Government would no longer remain a shareholder through MGI Ltd or through any other commercial vehicle and therefore expects to be compensated both for its shares in Fort Chambray Ltd as well as for granting the new contract.

These pre-conditions were considered by the government to be absolutely necessary in order for any further discussions and negotiations to take place. Negotiations were long drawn out, principally because before negotiations could start with the government, negotiations had to be concluded between the present developers and Avv. Memmo (who still held the original emphyteusis over the development) to determine who would take forward the development of Fort Chambray on the basis of the pre-conditions set by the government. It should be made clear that the government was never involved in these negotiations.

Eventually, all the present developers and Antimen slr presented Dr Michael Caruana to the government as the person to whom they were willing to transfer their shareholding in the three companies (Fort Chambray Ltd, Forti Development Ltd and Forti Resort Hotels Ltd).

Following an intensive process of negotiations with Dr Caruana, the Information Technology and Investments Minister has signed Heads of Agreement with Dr Caruana the principal points of which are the following:

• Dr Caruana and his brothers, through their family company, will become the sole shareholders in the development and will buy out all the present developers, including Avv. Memmo;

• The new developers have agreed that they will not transfer the development to any third

person until the development is completed (save for the sale of completed apartments) and they will similarly not transfer shares in the companies which will be the shareholders of the development;

• All present contracts will be rescinded and a new contract will be entered into between the government and the new developers (i.e. Dr Caruana and his brothers);

• The new contract will transfer the land on emphyteusis to the new developers for the remaining period of the original grant but under totally new conditions;

• Government will net the sum of Lm3,700,000 from the sale of shares, one-time payment for the new contract, ground-rent redemption, taxes and duties;

• Government will have a first-ranking hypothec of Lm3,900,000 to secure its rights over the

development;

• The new developers are obliged to finish the development in three stages with the last stage date-lined at three years from the issue of the relative permits. The new developers have also agreed that should they not observe the time limits for each stage, Government will have the right to take back all the development and not pay any compensation to the new developers;

• The new developers have obliged themselves to deposit the sum of Lm100,000 with Mepa within seven days of the new contract in order to address the issue of the existing stop notices and to apply to Mepa within 30 days to re-

activate the existing permits with no variations from the permits as originally approved;

• With respect to the hotel site, the new developers have been granted an option – exercisable within one year – whether to retain this site for use as a hotel or to change its use to apartments and should they opt for the latter option such option shall be subject to approval from Mepa; and

• While on completion of the development the individual units may be transferred to third parties, the new developers shall always remain responsible for the fortifications, the Knights Barracks, the Polverista and the common parts and they shall have the obligation to conserve the same ensuring that no damage is caused thereto and to restore them in accordance with applicable local heritage requirements.

These Heads of Agreement will now be translated into a contract between the Government Property Division and the Caruana family which contract will require approval by Parliament.

Dr Gatt said that he is satisfied that notwithstanding the very real legal and financial difficulties which surrounded this development, a solution has been found out of the impasse which, while guaranteeing the rights of the general public as represented by the government, makes it possible for the development to be completed within a determinate time schedule.

The completion of the development is an important added value for the Gozitan economy since it should attract to the island persons wishing to have up-market accommodation in Gozo with the resultant residual beneficial effect that is well known to all Gozo. It is today recognised that a substantial part of the Gozitan economy – both financial and in employment terms – is today driven by non-Gozitans owning property in Gozo and the Chambray development aims at augmenting and stimulating this economic sector.Minister Gatt concluded that the conclusion of this complex issue in the government investments’ portfolio is once again evidence of this Government’s ability to tackle problems with competence and long-term vision in the general public interest.